Workers On Average Earnings Priced Out Of Housing Market

Workers On Average Earnings Are Priced Out Of The Housing Market In 21 Areas In Scotland A New GMB Report Shows

A massive programme to build more houses is absolutely essential and has to get underway without delay says GMB

Workers on average earnings in Scotland are priced out of the housing market in 21 out of 32 areas a new GMB report published today that shows current average house prices in the area are between 3.7 and 7.6 times average earnings.

In Scotland as a whole, the average house price in July 2016 was £143,711 which is 5.2 times the average full time earnings of £27,732. House prices are rising at a much faster pace than earnings with the house price to earnings ratio now 7.8 on average across the UK. Average house prices in Scotland increased by 3.4% in the year to July 2016.

The situation is most extreme in Edinburgh where average house prices are 7.6 times average earnings, 7x in East Lothian, 6.7x in Stirling, 6.6x in Perth and Kinross and 6.5x in Aberdeenshire.

A ratio of 4.5 times a borrower’s income is regarded as the maximum that banks and building societies will lend.

Set out in the table below are house price data and average earnings for all authorities in Scotland ranked by areas with the highest ratio. See notes to editors for sources and definitions.

Gary Smith, GMB Scotland secretary, said, “These figures show that a massive programme to build more houses, especially houses for rent, by the Local Authorities is absolutely essential in all parts of Scotland and has to get underway without delay.

We have been talking about this problem for far too long, there can be no excuses for not providing housing to people that they can afford to live in on average wages.

The decisions of the Thatcher government in the 1980’s to sell council housing stock, and not replace it, and to pay landlords housing benefit instead of providing social housing directly has been a huge and expensive mistake.

Last year, for example, £24 billion (£1.77bn in Scotland) was spent on housing benefit. If a fraction of that amount had been spent on social housing for rent, the strain on the tax payer would be less and people would have housing they can afford to live in.

These mistakes need to be corrected without delay, fair and affordable housing is a basic aspiration for all.”

End

Contact: Peter Welsh, GMB Scotland Communications, 07976 447 077

Notes to Editors:

1 Source: House price data from UK House Price Index for July 2016. UK HPI data published by Land Registry © Crown copyright 2016. The UK House Price Index (HPI) uses house sales data from the Land Registry and Registers of Scotland and is calculated by the Office for National Statistics.

2 Earnings data is from the Annual Survey of Hours and Earnings 2015, Office for National Statistics. Data is for gross median annual pay for all full time employees by place of residence.

3 GMB recognise that the house price to earnings ratio is only one measure of housing affordability. In practise, households seeking to buy a new property will possibly have 2 incomes and the lender will take that additional salary into account when working out affordability. However, the house price to earnings ratio can use data from the Annual Survey of Hours and Earnings which is more recent than other incomes data and the survey is much larger, enabling more robust analysis. A recent study by the Institute for Fiscal Studies shows that ‘the story has been broadly the same whether looking at the ratio of prices to family income or the ratio of prices to individual earnings.’