House prices soar out of reach of wages in Devon

NEW figures show buying a home has become increasingly difficult across Devon as wages have failed to keep up with rising property prices.

The affordability gap has increased in every part of the county, with rural areas worst affected.

Generally, buying property is more affordable in the more densely populated urban areas, with the gap between earnings and prices higher in the more rural districts popular with holidaymakers and second home owners.

The biggest affordability gap in Devon is in the South Hams, which has the highest rate of second home ownership in the Westcountry. In 2001, the average property price was 6.69 times local average earnings. By 2011 that had risen to 11.85, and in 2021 it was 12.56. The figures show that by last year the purchasing power of local people to buy a home, based on their earnings, had fallen by half in 20 years. It means property prices have increased at around double the rate of income over the same period.

The figures have been produced by the Office for National Statistics (ONS), by dividing the average property price in an area by average earnings, to give a ratio. The higher the ratio, the less affordable property is in relation to local incomes.

The figures give more evidence of the factors behind the housing crisis, which has seen rocketing prices push home ownership further out of reach for local people in a relatively low-wage region.

Prices have been driven up by demand from second home owners, and people relocating to Devon to work from home, following changes introduced during the pandemic becoming permanent. That has also led to a shortage of rented homes and rising rents, as landlords sell up to take advantage of rising prices, or switch to more profitable short-term lets for holidaymakers.

The figures show Plymouth as the most affordable place to buy property in Devon 2021, followed by Torbay and Exeter. Based on average property prices and average earnings, Plymouth had the lowest house price to earning ratio of 7.27. The rankings for the rest of Devon from most affordable to least are Plymouth (7.27), Torbay (8.90), Exeter (9.22), Mid Devon (9.29), Torridge (10.34), North Devon (10.46), East Devon (10.88), Teignbridge (11.40), West Devon (11.96) and South Hams (12.56).

The ONS has also produced figures based on the lowest quarter of average earnings and property prices. They show a similar picture, with a doubling of the affordability gap across Devon over the 20 years to 2021. That shows for the lower-paid workers and cheaper homes last year, the most affordable area was again Plymouth with an earnings to property price ratio of 7.26, and the least affordable was West Devon, with a ratio of 12.39.

The rankings for Devon, for most to least affordable, were Plymouth (7.26), Torbay (8.45), Torridge (9.48), North Devon (9.57), Mid Devon (9.63), Exeter (9.83), Teignbridge (10.62), East Devon (11.07), South Hams (11.58) and West Devon (12.39). The figures show that firsttime buyers are under huge pressure, as they generally have to save for a deposit. As house prices increase faster than wages, the deposit amount needed will keep on rising, as will the amount needed to borrow on a mortgage to make up the difference. While historically low stable interest rates have lessened the effect of larger borrowing, the current rising inflation and interest rates, with wages failing to keep up, will effectively work as a double squeeze on affordability.

That will be even worse in the South West region, where wages have been traditionally lower in general. House prices have rising faster than other areas, partly due to the demand from wealthy incomers. The effects of the pandemic has also fuelled price rises. While that will be welcomed by sellers, it means local buyers being priced out.

For example, in Brixham, on the south Devon coast, asking prices have risen by almost a quarter in the 12 months to March 2022, the highest increase in Britain, with Torquay and Paignton not far behind. One local estate agent said the price rise was being fuelled by demand for second homes, and people wanting to relocate to the Devon coast to take advantage of working from home.