There are a couple of interesting house price ratios. The first is
the ration of gross salary to house price, which in the UK is normally
no more than 3:1 (salary:house price) as normally lenders will only
lend a maximum of three times the gross salary of an individual.

The second interesting ratio is the ratio of annual rent to price of
the house. A normal ratio is 14:1 (rent:house price). This is
important because rental rates are more liquid/current than sale
prices and so more accurately reflect the real price of a house,
not the vendor's "dream" valuation.

On both counts UK house prices are still way over the normal level you
would expect. Where I live a two bedroom house is available to rent
for £8400 pa, giving a £117 600 sale valuation, a typical
salary where I live would be £30k pa, giving a valuation of
£100k (30x3 + 10% deposit). However you calculate the normal
value of a property, it's an awful lot less than the the current
asking prices of £180-200k. Is it any wonder that nothing is
selling? and prices continue to fall...?

posted 13:58 ::
/stuff/house ::
permalink ::
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