House price to earnings ratios

Summary

In 2021, the house price to earnings ratio of 9.05 for England as a whole was higher than the ratios for all of the authorities in the Lancashire-12 area.

Locally, there are some very wide variations in the ratios that emphasise the large disparities in general affordability across the Lancashire-12 area, ranging from 4.04 to 7.44 times earnings.

Burnley (4.04), Hyndburn (4.2) and the neighbouring unitary authorities of Blackburn with Darwen (5.17) and Blackpool (5.41) had the lowest house price to earnings ratios of less than 5.5.

Burnley and Hyndburn had the 3rd and 4th lowest overall ratio out of 309 local authorities in England. Copeland in Cumbria had the lowest ratio of 3.14.

There were six local authorities in the Lancashire-12 area with house price to earnings ratios between 5.5 and 6. The ratios for the Lancashire-12 area itself (5.93) also fell into this range.

For people wishing to enter the housing market, analysis of housing affordability for this market segment can be measured by looking at the ratio of lower quartile house prices against the lower quartile earnings by local authority. In 2021, this ratio was 8.04 for England, appreciably lower than the overall house price to earnings ratio of 9.05.

Burnley (3.32) had the lowest ratio of lower quartile house prices to lower quartile earnings in the Lancashire-12 area, followed by Hyndburn (3.5) and Pendle (4.7). The ratios in Burnley and Hyndburn were the 1st and 3rd lowest respectively in England.

Ribble Valley (7.57), Fylde (7.39) and West Lancashire (7.26) had lower quartile median house price to earnings ratios in excess of 7. All of these, along with Chorley (6.27) and Wyre (6.02), actually had higher ratios for the lower quartile median earnings and house prices than for overall median earnings and house prices. In South Ribble the ratios were almost identical at 6.4.

The commentary in this article gives details of the ratios, but the Power BI report also covers the median earnings and median house prices.

To enlarge the slides to full-screen, click on the arrow on the slide's footer that looks like this: To return to a normal display, use the Escape (Esc) key.

 Microsoft Power BI report

Background information

The house price to earnings ratios are calculated using ONS House Prices Statistics (based on Land Registry data) and earnings from the Annual Survey of Hours and Earnings (ASHE), which indicate the affordability of houses for working people. Lower ratios tend to suggest greater affordability but may indicate lower earnings, reduced purchasing power and/or lower demand an area. Higher ratios tend to indicate less affordable housing, greater demand and difficulty for households to get onto the property ladder. See also the Notes section, which is the last slide on the Microsoft Power BI report.

The median house prices indicate the values of houses sold in that 12-month period, rather than estimates of all house values in that local authority. As the number, and type, of properties sold may vary considerably from year to year, so the ratios and rankings may fluctuate as a consequence. The time periods run September to September.

House price to earnings ratios for local authorities in the Lancashire-14 area

In 2021, the house price to earnings ratio of 9.05 for England as a whole was higher than the ratios for all of the authorities in the Lancashire-12 area.

Higher ratios tend to indicate less affordable housing, greater demand and difficulty for households to get onto the property ladder. Lower ratios tend to suggest greater affordability but may indicate lower earnings, reduced purchasing power and/or lower demand in an area.

Locally, there are some very wide variations in the ratios that emphasise the large disparities in general affordability across the Lancashire-14 area, ranging from 4.04 to 7.44 times earnings. Burnley (4.04), Hyndburn (4.2) and the neighbouring unitary authorities of Blackburn with Darwen (5.17) and Blackpool (5.41) had the lowest house price to earnings ratios of less than 5.5. These ratios were the third, fourth,15th and 22nd lowest respectively out of 309 local authorities in England.

Preston (5.65), Pendle (5.66), Chorley (5.73), Lancaster (5.78), Rossendale (5.79) and Wyre (5.93) had ratios in excess of 5.5 times earnings (but less than 6 times earnings). These bunched around the county (5.93) ratio.

Only South Ribble (6.4) had a ratio between 6 and 7 times earnings, but this was similar to the regional value (6.41).

West Lancashire (7.13), Fylde (7.21) and Ribble Valley (7.44) were the three local authorities that had ratios in excess of 7 times earnings.

Affordability to enter the housing market

For people wishing to enter the housing market, analysis of housing affordability for this market segment can be measured by looking at the ratio of lower quartile house prices against the lower quartile individual earnings by local authority.

Table 3, (On slide 2 of the Microsoft Power BI Report) which shows the ratio of lower quartile house price to lower quartile earnings for local authorities in the Lancashire-14 area depicts a similar situation to the overall housing affordability ratios provided in Table 1.

In 2021, the ratio of lower quartile house prices to lower quartile earnings for Ribble Valley (7.57) was the highest in the Lancashire-14 area. This suggests that Ribble Valley is the hardest place to enter the housing market in the Lancashire-14 area.

Burnley (3.32) had the lowest ratio of lower quartile house prices to lower quartile earnings in the Lancashire-14 area, followed by Hyndburn (3.5), Blackburn with Darwen (4.55), Pendle (4.7), Blackpool (4.89) and Preston (4.95). These ratios were the lowest, third, ninth, 13th, 16th and 20th lowest respectively out of 309 local authorities in England. These figures suggest that it is much easier to enter the housing market in these areas.

Rossendale (5.37), Lancaster (5.67), Wyre (6.02), Chorley (6.27) and South Ribble (6.39) had lower quartile house price to lower quartile earnings ratios that were above 5 but below 7, making them close to the county (5.61) and regional (6.1) ratios.

In 2021, the lower quartile house prices to lower quartile earnings ratios were higher than the overall house price to earnings ratios in Chorley (6.27, +0.54), Fylde (7.39, +0.18), Ribble Valley (7.57, +0.13), West Lancashire (7.26, +0.13) and Wyre (6.02, +0.09). These figures indicate that it is even more difficult for the lower paid to get a foot on the housing ladder in these areas.

In South Ribble the overall house price to earnings ratio was almost the same as the lower quartile ratio in 2021, at 6.4 and 6.39 respectively.

The lower quartile house prices to lower quartile earnings ratios were lower than the overall house price to earnings ratios in 2021 in the other eight Lancashire-14 local authorities, as well as in the Lancashire-12 area, the North West region and England as a whole. The ratios for Pendle (4.7, -0.96), Burnley (3.32, -0.72), Hyndburn (3.5, -0.7), Preston (4.95, -0.7) and Blackburn with Darwen (4.55, -0.62) indicates that it is easiest for those with low earnings living there to purchase a house.

Many of the areas recorded their highest ratios around 2007. As figures 2 and 6 show, in 2021 most areas saw a major leap compared to 2020, when Covid-19 restrictions suppressed activity in the housing market. The effect is seen nationally, which explains why the low rankings of some of the Lancashire authorities remain unchanged.

The districts of Burnley, Hyndburn and Pendle have around 60% of their dwelling stock in Council Tax Band 'A', see the Lancashire Insight article. From this we would expect greater affordability in the housing market for the lower paid, but we should remember that not all of these properties are owned , or being purchased, by the resident, see the Lancashire Insight article on Dwelling stock by tenure.

Page updated April 2022.


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