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LSL New Build Index
March 2015
As we see more positive headlines about the property market, following the Budget announcement, LSL Land & New Homes brings further news about the movement in new build prices across the UK but also an insight into the relative affordability of new homes in each region as Shaun Peart, Managing Director of LSL Land & New Homes, explains:
mortgage. A figure above 100 implies that a greater than average proportion of income is needed to service a mortgage. It is clear that in regions such as the East Midlands, North East and Yorkshire and Humberside that affordability is more favourable but, as expected, it is those buyers in Greater London, East Anglia and the South East who may feel ‘the pinch’.
In the year to the end of February 2015 the year on year growth in new build prices is 7.0% which is a slight fall on last month’s figure of 7.2% and, as reported last month, the regional growth compared to the slowing growth in Greater London is continuing.
The LSL Land & New Homes Affordability Index is based on:
Excluding Greater London, the average regional growth rate now stands at 4.7% against a figure of 0.9% for this time last year when some regions were showing negative growth and the overall picture was largely flat. Now all regions are showing growth over 2% with the highest performers being generally closest to Greater London. It is likely, however, that the apparent slow down in the Greater London market will be, in part, due to the relative affordability of new homes which we are now able to monitor in our LSL Land & New Homes Affordability Index. An index below 100 implies that property is more affordable with a below average proportion of income needed to service a
• The average price of a 70 sq m new build property, using a weighted index of flats and terraced housing, representing the available mix in each region is taken (previously terraced property only was used). • Average full time earnings are taken using ONS data. • The House Price Earnings ratio - created for each region by dividing the average earnings into the average price. The higher the ratio, the less affordable property is / the greater the amount of earnings that needs to go into paying a mortgage. • These HPE ratios are then indexed to create an affordability index for each region where the average of all is 100. Data sources: LSL New Build House Price Index ONS, EARN05 – Average weekly gross earnings of full time employees, by region.
2 bed 70 sqm starter home
Average annual Full Time earnings
£178,478
£30,193
5.91
East Midlands
£104,144
£27,252
3.82
73
Greater London
£378,152
£37,864
9.99
191
North East
£98,627
£25,242
3.91
75
North West
£116,977
£27,232
4.30
82
Scotland
£133,667
£26,932
4.96
95
South East
£191,959
£32,972
5.82
111
South West
£149,904
£28,177
5.32
101
Wales
£119,045
£24,737
4.81
92
West Midlands
£125,990
£26,290
4.79
91
Yorks & the Humb
£105,488
£26,197
4.03
77
Average
5.24
100
Regions
East Anglia
HPE
Affordability Index
113