A Scottish agency has warned that property affordability may be reduced for many individuals after the increase in affordability ratios and the value of unsecured personal loans.
After analysing housing data over the last five years, DJ Alexander said that housing affordability stabilised in 2018 after five years of decreasing affordability, but still remains “considerably worse” than 20 years ago.
The affordability ratio, which increased in the mid 2000’s, has not yet been reduced to pre-recession levels. This has resulted in a steep variation of housing affordability: in the North West of England, average house prices are 2.5 times the average workplace-based earnings, while in Kensington and Chelsea, prices are 45 times the average workplace-based earnings.
At the same time, the value of unsecured personal loans has risen “substantially” across the country. The largest increase over the last five years was 22.5% in the East of England at 22.5%, while the average increase was 18.2%.
David Alexander, joint managing director of apropos by DJ Alexander, said: “Affordability remains an issue for many people as more stringent lending criteria has limited mortgage lending, although there is no doubt that it has improved stability in the housing market.
“The substantial increase in unsecured personal lending hints at a growing demand for funds which could potentially limit future property lending for many in the country.”
He added: “Growth in demand will continue as the population continues to increase, and there are only two ways to improve affordability – that is to increase supply or ensure that incomes rise at a faster rate than house prices.”
He called for a “coordinated approach” to build more social housing, increase the number of affordable homes, and provide greater financial and regulatory encouragement for the housebuilding sector in order to ease demand and produce steady growth.
Alexander added: “The key issue is ensuring that the marketplace remains vibrant and dynamic without becoming uncontrolled.
“The balancing act between maintaining stability and encouraging growth is a difficult one which has been managed quite effectively since 2008, but perhaps a slight relaxing of the financial constraints, including lending criteria, would ease the situation and encourage growth in areas which have become less affordable in recent years.”