Housing Affordability: A Surprising Recovery

The Numbers Behind the Recovery

The statistics paint a remarkably different picture from the doom-and-gloom headlines. Between 2014 and 2024, full-time salaries have increased by an average of 37.5% across the UK, while house prices have risen by just 18.2% for 1-2 bedroom flats within three miles of city centres.

Perhaps most striking is London, where the salary-to-house-price multiplier has dropped from 16 times annual salary in 2014 to 12.1 times in 2024—still high, but representing a significant improvement. Across the broader UK market, the multiplier has decreased from 6.0 to 5.1 times annual salary.

The Post-2022 Turning Point

The inflection point came after the 2022 mini-Budget, when house prices began falling while wage growth continued. This created a unique convergence where workers found themselves with more purchasing power relative to property values than they'd enjoyed for years.

Cities like Manchester and Birmingham have seen particularly dramatic improvements, with affordability ratios improving by over 40%. Even in historically expensive markets like Bristol and Cardiff, the trend holds, with meaningful reductions in the salary multiples required for home ownership.

What's Driving the Change

Several factors have contributed to this affordability recovery:

• Wage Growth Momentum: Post-pandemic labour market tightness has driven sustained salary increases across most sectors, with full-time workers seeing substantial real-terms improvements in their earning power.

• House Price Corrections: Following the mortgage rate shock of 2022, property values have adjusted downward in many markets, removing some of the froth that built up during the pandemic years.

• Inflation Impact: While often viewed negatively, controlled inflation has helped erode the real value of existing property prices while wages have kept pace or outperformed.

The Rental Market Response

This improved affordability landscape has significant implications for the BTR sector. At a recent Bidwells roundtable attended by industry experts, one participant noted:

If you look at affordability of our residents, it's around 25% of gross income. But you need to look at disposable income—someone earning £80,000 might have similar disposable income to someone on £30,000 after all their commitments.

The improving affordability metrics suggest several potential outcomes:

• Increased Competition: Better affordability could drive more renters toward homeownership, potentially reducing rental demand

• Quality Expectations: Renters with improved financial positions may demand higher-quality rental products

• Market Segmentation: Clear differentiation between choice-driven renters and necessity-driven renters may emerge

The Demographic Divide

Interestingly, the affordability improvement comes at a time when rental has increasingly become a lifestyle choice rather than just a financial necessity. Many renters, particularly younger professionals, actively choose rental living for the flexibility, amenities, and reduced responsibility it offers. As one roundtable participant observed:

There are people who choose to live in rental products not because they couldn't buy—they actually could buy—but because they choose the flexibility and services that come with professional rental management.

Regional Variations Tell Different Stories

While the national trend is positive, regional variations reveal important nuances:

• London: Still challenging but improving significantly

• Northern Cities: Manchester and Birmingham showing the strongest affordability gains

• Secondary Cities: Places like Newcastle and Sheffield now offering very attractive affordability ratios

• South-West: Bristol and Cardiff maintaining higher multipliers but still improving

Looking Forward: Sustainability Questions

The critical question facing the market is whether this affordability recovery is sustainable. Several scenarios could play out:

Scenario 1: Continued wage growth with stable house prices extends the affordability improvement

Scenario 2: House prices rebound as interest rates normalise, eroding recent gains

Scenario 3: Economic headwinds slow wage growth, stalling the recovery
Implications for BTR Strategy

For BTR operators and investors, this affordability recovery presents both opportunities and challenges:

Opportunities:
• Target renters who choose rental by preference, not necessity
• Develop premium products for an increasingly affluent renter base
• Expand into secondary cities where affordability is strongest

Challenges:
• Increased competition from homeownership options
• Need to justify rental premiums in an improving affordability environment
• Potential pressure on rental growth as alternatives become more accessible

The Bigger Picture

The affordability recovery reminds us that housing markets are cyclical and that policy interventions, while important, work alongside broader economic forces. The current moment represents a unique opportunity to reshape the rental sector around choice and quality rather than necessity and compromise.

However, as one government representative cautioned:

We focus too much on house price-to-income ratios and not enough on the proportion of income spent on housing costs across different demographics.

The affordability recovery is real, but its impact will depend on how the industry adapts to serve a renter base that increasingly has options. Those who recognise and respond to this shift will be best positioned for the next phase of the operational living evolution.

Get in touch with our team

Iain Murray

Head of Operational Living

Iain spearheads our Operational Living department across PBSA, Co-living, Build to Rent, Later Living and Retirement.

Want to Understand How Affordability Trends Impact Your Strategy?

The changing affordability landscape creates new opportunities and challenges that vary significantly by location, demographic, and product type. Our research team can provide detailed market analysis and strategic guidance tailored to your specific investment or development goals.

Understanding these affordability dynamics is crucial for:

• Investment targeting and market selection
• Product positioning and pricing strategies
• Future demand forecasting and risk assessment
• Policy response and advocacy planning

Find out more

Contributors:

Iain Murray

Head of Operational Living

Housing Affordability: A Surprising Recovery

Amid the constant narrative of housing becoming increasingly unaffordable, new data reveals a counter-trend that challenges conventional wisdom.

For the first time in over a decade, the gap between wages and house prices is actually closing across the UK, creating unexpected opportunities in the rental market.

Contributors:

The Numbers Behind the Recovery

The Post-2022 Turning Point

What's Driving the Change

The Rental Market Response

The Demographic Divide

Regional Variations Tell Different Stories

Looking Forward: Sustainability Questions

The Bigger Picture

Get in touch with our team

Want to Understand How Affordability Trends Impact Your Strategy?

Contributors:

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Search Bidwells

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Housing Affordability: A Surprising Recovery

Amid the constant narrative of housing becoming increasingly unaffordable, new data reveals a counter-trend that challenges conventional wisdom.

For the first time in over a decade, the gap between wages and house prices is actually closing across the UK, creating unexpected opportunities in the rental market.

Contributors:

Share:

The Numbers Behind the Recovery

The Post-2022 Turning Point

What's Driving the Change

The Rental Market Response

The Demographic Divide

Regional Variations Tell Different Stories

Looking Forward: Sustainability Questions

The Bigger Picture

Get in touch with our team

Want to Understand How Affordability Trends Impact Your Strategy?

Contributors:

Share:

Insights to your inbox

Search Bidwells