House prices up 0.3% in May
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by Gill Montia
The price of a typical UK home rose by 0.3% in May compared with April, to £166,022, according to Nationwide.
Despite the monthly improvement prices were 0.7% lower than a year ago (April: -0.9%) and the lender warns that housing affordability remains an issue.
At more than five times average earnings, prices are still high relative to incomes (long run average – four times earnings) pointing to underlying supply issues, especially in the South.
Affordability appears less stretched when comparing the cost of mortgages to incomes; repayments on a typical home loan are equal to around 31% of take home pay, the lowest level for a decade, but only because interest rates are near three hundred year lows!
Meanwhile, rental growth is outpacing wage growth by a significant margin, with the pattern of rental affordability showing a close correlation with house purchase affordability.
London stands out as the least affordable region, with rent taking up nearly 40% of earnings and average house prices more than six times earnings.
Nationwide’s house price index was first produced in 1952 and is therefore sharing an anniversary with The Queen in her Diamond Jubilee year.
According to the lender, the average UK house price has increased from £1,891 to £166,022 over the 60 year period, an almost 88-fold increase, while the cost of goods and services have recorded a more modest 25-fold increase.
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