Most unaffordable areas for homes in county revealed
MOST PROPERTY 4.5X AVERAGE SALARIES, FIGURES SHOW
LESS than one in 12 Leicestershire neighbourhoods have homes that would be affordable to local people on average wages.
Typically, it is hard to borrow more than 4.5 times your salary to get a mortgage.
But many people looking to buy a home in parts of Leicestershire without a big deposit would need to borrow nearly 10 times the local average income to be able to afford a house.
Analysis of government figures by the Mercury has revealed just how unaffordable homes across our area have become.
The analysis works by comparing average household income in each neighbourhood with the average house prices there.
In one neighbourhood in the Belgrave South area of Leicester, the average family would need to borrow 9.7 times the local average annual income to afford a home.
Belgrave South is defined as the area between Melton Road, Canon Street and Humberstone Road.
It makes it the least affordable area in the county.
While the average net household income in that neighbourhood is about £22,770 a year, houses sold for an average of £222,000 in the year to September 2020.
Meanwhile, things are very different just down the road, the data suggests.
A house in Leicester city centre – the most affordable area in the whole of Leicestershire – could be bought for just 2.5 times the average household income.
There, the average net household income is an estimated £45,646 a year, and the average home cost £113,500, according to the latest figures.
Since 2014, the Bank of England has set the maximum ratio of loans as 4.5 times income. Only 15 per cent of all mortgages are allowed to exceed this.
Based on this level of maximum borrowing, only 8 per cent of neighbourhoods in Leicestershire are actually affordable to those living there.
Across England and Wales, the least affordable areas to buy a house are the Knightsbridge, Belgravia and Hyde Park areas of London.
The average house price there is £3.2 million – or 91.7 times the average income in those locations.
Outside of London, the most expensive neighbourhood is in the Oxshott and Stoke D’Abernon area of Elmbridge, Surrey, where homes typically sell for £1.1 million – 24.2 times the average income.
Meanwhile, the most affordable place to buy a house is in the Horden area of County Durham, where the average cost of a property in the year to September 2020 was £38,000 – that’s just 1.6 times higher than the average income.
Overall, just 17 per cent of neighbourhoods across England and Wales would be affordable to the average household, based on maximum borrowing levels of 4.5 times annual income.
Estimates for average income are based on the income of every member of the household in 2018, including employment income, investment returns, and benefits, minus taxes, pension contributions, and maintenance payments – adjusted for the average rise in earnings seen between 2018 and 2020.