In part one of this UK housing market valuation and forecast, I looked at the latest house price-to-earnings ratio in the context of historic norms (here’s a link to part one).
My conclusion was that the UK housing market appears to be at the “expensive” end of its valuation spectrum, with the house price to earnings ratio at 5.16, some 29% above its long-term average of 4 (where the average house price today is £196,067 and average earnings are £37,962).
At the end of the article, I mentioned that the house price-to-earnings ratio had been based on the earnings of the average home buyer rather than the average UK employee (including those who cannot afford to buy).
I wanted to re-do the housing market valuation and forecast using the broader UK average earnings figure as I thought it would produce a more accurate measure of how expensive the market really was.
However, now that I’ve looked at the data a second time, that doesn’t appear to be the case (largely because I misread some of the data the first time around).
Instead, whether house prices are compared to home buyer earnings or average UK earnings, both ratios seem to be saying the same thing, to almost exactly the same degree.
Continue reading “UK housing market valuation and forecast – June 2015 (part 2)”