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House prices often now over 10 times earnings

The latest house price and incomes data shows that 24 boroughs across England and Wales now have property values in excess of ten times local earnings according to analysis by Barclays Private Clients the wealth management arm of Barclays.

The highest ratio is in Kensington and Chelsea where property prices are now 18 times (£663,506) local earnings despite the borough having the highest incomes in the country (£36,493).

Kensington is followed by Westminster and Camden in London at 13.5 and 12.8 respectively, with Elmbridge in Surrey at 12.8. The average across England and Wales is 5.98.

The phenomenon is not confined to London and the South-east.

Other high ratio areas:

• Cotswold in Gloucestershire 9.9.
• East Dorset 9.6.
• Purbeck in Dorset 9.2.
• South Hams in Devon 9.0.
• East Devon 8.7.
• Malvern Hills in Worcestershire 8.8.

The one thing that these outer areas have in common, according to Gordon Rankin, marketing director of Barclays Private Clients, is their desirability with second homers.

Mr Rankin comments: “Places like the Cotswolds, East Dorset and the South Hams of Devon have seen huge property price inflation in recent years fuelled in many instances by demand from those who live outside the area looking for second homes.”

“Average property prices in these areas are now higher than in many areas of the South-east. For instance in East Dorset prices are over £200,000, higher than South-east commuter towns such as Tonbridge and Broxbourne, and London suburbs like Enfield, where people all benefit from London salaries.”

In London 31 of the 32 boroughs have property prices over seven times earnings, the odd one out being Barking and Dagenham at 6.5.

Outside of London, the counties most affected by the disparity in local income to property prices are Surrey, Dorset, Devon and Cornwall. In Surrey and Cornwall all boroughs have an index of over seven. Dorset has seven out of eight boroughs, and Devon has eight of its ten boroughs, with property prices above seven times local earnings.

“Obviously the difference between income and property prices is not everything in terms of affordability as many already have a lot of equity in property, however, the data does give real insight into those areas which are hot spots at the moment,” said Mr Rankin.

“The South-east and pockets of the South-west obviously dominate, whereas the north of England and Wales have no boroughs in the top 100 of the index. Harrogate is the highest at 102 (7.72), indicating that the north of England and Wales have potential for further price increases.”

The most affordable property in the country is in Burnley, Lancashire, where the average income is £20,467 and average property prices are £34,860, giving it an income/property index of 1.7.

The data is from the Land Registry and was for property prices in England and Wales for June to September 2002. The Average incomes are for 2002 and calculated on information from Barclays data warehouse with over five million incomes surveyed. The index is a simple calculation of property price divided by local annual income to give the index.