Monday, 18 November 2013

England - Ratio of Median House Prices to Median Earnings

So the UK housing market is back in full swing, house prices are on the rise (greater than earnings obviously), and the 95% variable-after-a-bit mortgage is back thanks to the insurance companies re-instating mortgage indemnity guarantee insurance.

Now we're getting lines from vested interests that housing is more affordable than it has been for a long time, with lots of comparisons of 'average' house prices with 'average' earnings.

But of course as anybody with even a rudimentary knowledge of stats knows, there is more than one 'average'.

The vested interests generally use the mean or 'simple average', and earnings on that basis are skewed heavily towards to top end of town due to multi-million pound earnings at the very top. And of course a bigger denominator causes a smaller ratio overall. 

I already know that the top end of town can afford lots of property - many ordinary people rent their shacks because there is no social housing alternative. What I want to know is what it is like for Joe Average buying a middle of the road house.

And for that I need the ratio of median house prices to median earnings, which is surprisingly difficult to find. But if you look hard enough you can find it - just about. But only, it seems, the value for England.

And when you graph that, you get this.
Call me old fashioned, but I'd say that 6.74 time earnings is a bit on the dear side.