House-price affordability has taken a downward turn for the first time since property values started falling. It means that property prices are beginning to move beyond the reach of the average buyer.
Research carried out for The Sunday Telegraph by Lombard Street Research (LSR) showed that affordability in the UK property market has been on the decrease since the middle of 2009.
House prices have begun to outpace the average increase in the disposable income of families, so it would appear that the moment for finding the best value in property might have passed.
This turnaround of affordability would have looked highly unlikely 12 months ago as house prices were tumbling at the start of 2009, and the property market looked a long way from recovery. However, measures such as low interest rates and benefit programmes by the government have helped to turn the market around quicker than most property gurus expected.
The housing affordability index from LSR dropped from 118.2 to 117.9 in the third quarter of 2009. It is the first fall since mid-2007, when the credit crunch started to hit. At that point, the index was at a low of 82.7. (The lower the index is, the worse affordability is.)
The Centre for Economics and Business Research (CEBR) yesterday published its forecast for house price movement in 2010. It said that it expected a rise of between two and four per cent by the end of 2010. Looking further forward, the CEBR forecast was for house prices to be around 15 per cent higher at the end of 2012 than they are now.
