Housing affordability hits five-year low

Friday 16 December 2016

With house prices up and incomes largely the same, housing in Jersey is apparently less affordable now than at any point during the last five years.

That’s according to the Housing Affordability Report 2015, released today by the States Statistics Unit.

Between 2010 and 2015, the median dwelling price rocketed to £415,000 – a rise of £10,000 - while the mean household income after tax made a measly increase of just £1,000 from £51,000 to £52,000.

As a result, only half of working households could afford a property of around £283,000 in 2015, while 40% of younger working first-time buyers are priced out of starter homes in the £224,000 bracket.

It’s a particular blow to those on a lower income of £32,000 or less, who will now be forking out nine times their gross income in order to grab a property in the lower pricing bracket.

Access to affordable properties for lower earners is symptomatic of the increasing wage gap, statistician Dan Edmonds said.

“The gap between the top quintile and the bottom quintile has got bigger - that wasn’t really as a result of the top people shooting away ahead of the norm, it was to do with reductions in the lower quintile. These earners are actually earning less money than they did five years ago – not just in real terms, in nominal terms.” 

Even Islanders with a steady job in the public sector are feeling the squeeze when applying for a mortgage: neither teachers, police officers or nurses employed for three to four years could affordably manage a mortgage for a lower-priced home alone.

One of the key elements of ‘affordability’, the study says, is that mortgage payments should consume no more than 30% of Islanders’ gross income.

But nearly three quarters of qualified private renters are spending this on leases payments anyway, placing them in the ‘rental stress’ category. 

Despite the news, Rock Property Owner and Director, Matthew Taylor, has said that appetite for housing at all levels has remained rather steady.

“I wouldn’t say there’s been an obvious impact in terms of demographic of buyer – if housing is less affordable, it’s still a case of people prioritising the house, and sacrificing a holiday in that year instead. It depends whether they want a roof over their head or are about living life,” he told Express.

It might be the case that Islanders are used to this bleak picture of affordability. In the period of 2002 to 2015, Island housing did not once meet the affordable line.

One and two-bedrooom flats, however, do fit affordability criteria.

But with an abundance of these available, the line to be walked is “a balance of what society needs and what planning deem appropriate,” Mr Taylor commented.

“It’s not a bad thing to ensure that sector of the community is catered for… but could result in other buyers being alienated in some way, shape or form.

“[Three-bedroom homes] are probably where the majority of potential buyers are – it wouldn’t surprise me if the new affordable homes developments have a massive waiting list of three to four families per property.”

Looking forward, States statisticians will be keeping a watchful eye over the impact of Brexit on housing – whether good or bad.

Mr Edmonds added: “Brexit will have some kind of impact – if you ask pro-Brexiteers, I’m sure they’ll say it will make it better, and Remainers will say it will make things worse. But big jumps in terms of house prices have always coincided with big jumps in GDP because people buy houses when they’re earning lots of money and are confident that their job is secure, and that drives demand.

“You’ve also got supply issues to consider in terms of the cost of building. The lower value of the pound means that cost of materials will go up and that might have an impact on supply.”

Either way, as Chief Statistician Duncan Gibault observes, the research shows that policymakers will have to be wary of a “one size fits all approach” when it comes to future housing strategy.

All infographics reproduced with the permission of the Jersey Statistics Unit.