Median house prices in England and Wales are now almost nine times the average salary, bringing the house price to wage ratio to an historic extreme.
House prices are a bit of a bellweather for personal finances. The higher they rise above wages, the more people experience housing insecurity: homelessness, temporary accommodation, unsafe housing, eviction, and repossession. That’s why the house price to wage ratio is an important figure to track.
New ONS data this week revealed a worsening housing crisis, so we’ve made a sonification of the last 20 years’ ratios. The sound source we’ve used for this synthesiser is, naturally, a recording of the Prime Minister defending the 1% pay rise for NHS workers in March 2021. A higher pitch and a slower repeat rate in the sound denotes a higher house price to wage ratio.
There’s a clear dip in the ratio from 2008 to 2009 during the global financial crisis, but what’s even more striking on close listening is how quickly it rebounded in 2010, offering respite only to those who could buy in 2009. The sonification also drives home the breathtaking pace of change between 2012 and 2017, when median house prices went from 6.68 times a median annual salary to 7.56. Listening to the ratio evolve gives you a sense of the pressure building, the ratcheting unaffordability of homes over the last ten years especially, and the painful screw-tightening that the 2021 data now reveals.
This is not just an English and Welsh problem. The French house price index in 2020 was at 2.38, versus 2.05 in 2010 and against a baseline of 1.00 in the year 2000, while wages increased by 12% in the same period. German dwellings experienced an even faster price increase during a 28% rise in wages. The UK’s 20% wage rise amid a 55% price increase between 2011 and 2021 looks mild by comparison.
Added to a relatively unregulated private rental market and large-scale privatisation, however, the social consequences in England and Wales remain dire. Landlords are more likely evict their tenants to upgrade housing when the land value rises, as is already happening in the Netherlands. In the UK, 38% of private renters are in poverty after paying housing costs. Only about half of UK dwellings are fitted with wall insulation, and most that were built before the late 1960s have no damp-proof membrane, so they wick moisture from the ground upwards into walls and cause major health problems. That is the last thing you want when heating costs are up—which, to put it mildly, they are.
As a sonification, this data raises another question: What ratio of house prices to wages is too high? What kind of unaffordability would be extreme enough for the Bank of England—which actually managed to avoid all mention of renters in a March 2020 blog post about how the housing market affects the economy—to declare an emergency? This very omission suggests the frightening prospect that, at least from a central banker’s point of view, there is no real limit.
by Jay Richardson
Friday 25th March 2022