CONCERNS have been raised that aspiring North-East homeowners are being priced out of the property market as houses now cost five times the average wage.
The TUC’s analysis of average salaries and house prices by local authority area shows that in 1997 the average house price in every area of the North-East was less than four times the average salary.
By 2013 not a single area had this level of affordability.
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The affordability ratio of five is particularly significant, says the TUC, as the Bank of England has recently instructed banks to limit the proportion of mortgages they offer that are more than 4.5 times applicants’ salaries.
The TUC believes that the combination of soaring house prices, stagnating pay in the run-up to the economic crash and the longest real wage squeeze in over a century will leave house prices more out of reach than ever before.
Although average house prices have not yet reached their pre-recession peak in many parts of the North-East, wage levels mean that buying a home remains out of reach for local people, says the TUC.
Their analysis found that wages in the North-East fell by around £1,320 a year in real terms between 2010 and 2013.
TUC regional Beth Farhat said: “Over the last 16 years, house price rises have outstripped peoples’ pay packets and left huge swathes of the region unaffordable.
“Last year, house prices in nearly half the North-East’s local authority areas were more than five times the average local salary.
“Unfortunately, the situation is compounded because our region has the highest unemployment rate and the lowest wages in the country.”
Ms Farhat said an ambitious house building programme was needed to get prices back under control and better rent deals were needed for people struggling to get on the property ladder.
She added: “Housing affordability isn’t just about house prices though.
“At the moment, earnings and house prices are going in opposite directions, pricing ordinary people out and denying them something as fundamental as a roof over their head.
“More and better jobs and decent wages would go a long way to limiting the impact of property price hikes for everyone.”
In both 1997 and 2013, Northumberland was the most unaffordable area in the North-East, where last year the average house price was almost six times the local average salary.
In 1997, Redcar and Cleveland was the most affordable but that has now been replaced by Middlesbrough.
Nationally, Copeland in the Lake District is the last local authority area left in Britain where average house prices were less than three times the average annual salary.
The top five least affordable areas are in London, with Kensington and Chelsea having average house prices more than 30 times the average local salary.