House prices, affordability and wages in Cornwall
The issue of house prices, their affordability and wages is a very important issue in Cornwall. This blog post is one of several I will be doing on the subject and will include comparisons of house prices in different Cornish settlements; their affordability compared the median and the house affordability ratio in the national content.
The issue of the affordability of a house in ratio to wages is large, but worryingly, it is getter larger as wages and house prices are not rising at the same, or even near the rate.
In 2000 an average house price in Cornwall could cost you £77,797.00. Compare this with the South West – £88,412 and for England and Wales – £83,373. So a house in Cornwall was 12% less than the South West Average and 6.6% than the England and Wales average. Now lets look at the average house price in 2014, but before I do, I hope you are sitting down. In 2014 the average house price in Cornwall was £183,721. An increase of 136% in fourteen years. The 2014 average for the South West is £181,471 and for England and Wales £173,228. For those interested the rise in the South West £105% and England and Wales 107%. (source Land Registry)
The house price increase is bad enough, but when you compare it with gross annual earnings you realise the affordability of a house in Cornwall is a major issue. In 2000 the average earnings (all work place employees) in Cornwall was £11,594. For the South West, £14,313 and for England and Wales, £15,952. This makes those in Cornwall paid 19% less than the South West and 27% less than England in Wales in 2000.
The 2014 gross annual earnings for Cornwall was £17,344; an increase of 49.5% between the two periods – which is good news. The increase to £20,081 for the South West is less of an increase than Cornwall at 40.2% when you compare the 2001 and 2014 figures. For England and Wales the wage increase is to £22,201; and increase of 39% again less than Cornwall. However, and this is one of the points, Cornwall is still paid 28% less than the England and Wales average, which is a disgrace. (source for wages is NOMIS and ASHE)
Next, let’s look at the affordability ratio in Cornwall, the South West and in England and Wales. In Cornwall the affordability ratio in Cornwall rose from 6.7 in 2000 to peak in 2004 at 12.5, then at 12.4 in 2007. The ratio then fell back but has been fairly stable at between 10.7 and 10.4 between 2007 and 2013. The ratio for 2014 has risen slightly to 10.6.
The South West saw an affordability rate of 6.2 in 2000 and 9 in 2014. For England Wales the ration was 5.2 in 2000 and 7.8 in 2014. It is clear the ratios have been consistently been higher in Cornwall than across England and Wales, and less affordable than both in the South West and England and Wales.
From this evidence is really highlights Cornwall has a major issue on the affordability of a house. Is this issue one of economics and supply and demand? If one is greater than you have a greater impact? If there were more houses, would prices be cheaper? Have holiday lets and second homes added to the pressure of increased demand and therefore higher prices? The answer is probably, but to point a finger at one is a rather simplistic method and one that will be more than likely wrong. I believe it is several issues that add to the housing issue in Cornwall. However, I feel the main reason is wages and the historic lower pay Cornwall has. In previous blogs: Cornwall is one of the lowest paid areas in the UK and Cornwall’s Average Wage there is a myth of low wages is in just one sector as from the evidence jobs in Cornwall are less well paid across the sectors it only reason why it seems is because those jobs are in Cornwall. Though, more research is needed on why this is.
Is this issue on of the chicken and the egg? Do we raise wages or lower house prices to make them more affordable?