House Price as a Multiple of Earnings
To judge affordability of the housing market, some metrics compare the average home price and the average salary in a given area. For example, in 2014, the average London home cost 16x the average Londoner’s salary. Averaged across England that multiple dropped to 10.
But just the previous year, the multiple in the UK was 7.0, with counties averaging from 5.92 to 14.35.
Interestingly, the housing federation doesn’t assert what affordability ratio they see as acceptable. Only that in the 1960’s the ratio was at about 4.5.
Forbes calls this the price-to-income ratio. In a report on a 2013 Zillow study, 30 U.S. metro areas were shown to have a ratio ranging from 1.5 (Detroit) to 7.0 (San Jose).
Leave a Reply