The relationship between earnings and house prices is one of the most fundamental measures of housing market health, and it has been moving in the right direction for three consecutive years. Research from Benham and Reeves, analysing house price and earnings data since 2022, shows that wage growth has outpaced house price inflation every year since 2023, a reversal of the pattern that made affordability so difficult for so many buyers through the post-pandemic period.
The house price to income ratio, which measures the average home value as a multiple of median gross earnings, peaked at 9.5 in 2022. It currently stands at 8.3 and is forecast to fall to 8.2 by the end of 2026, marking the fourth consecutive year of improvement. For context, a ratio of 9.5 meant the average home cost nearly ten times the median annual salary. At 8.3, that gap has narrowed meaningfully, though it remains well above the long-run historical average of around six to seven times earnings that characterised the market before the mid-2000s.
How the shift happened
The turnaround has been driven by a sustained period in which earnings growth has consistently outrun house price growth. In 2022, house prices surged by 11.2% while average earnings rose by just 6.9%, compressing affordability sharply. From 2023 onwards, that dynamic reversed. Earnings climbed 6.3% in 2023 while house prices fell by 1%. In 2024, wages rose 7.1% against a marginal 0.9% increase in property values. In 2025, the pattern held with wage growth of 4.1% outpacing house price growth of 3%. Forecasters expect the gap to continue in 2026, with earnings projected to rise 4.7% against a 2.9% increase in house prices.
The cumulative effect of four years of this pattern is a property market that is gradually becoming more accessible in real terms, even if it does not yet feel dramatically different from the inside. The ratio is falling slowly rather than sharply, but the direction is consistent and the underlying drivers, stronger wage settlements and moderating house price growth, are structural rather than cyclical.
What it means for buyers
For buyers, the improving affordability ratio is a genuine tailwind, though it does not operate in isolation. The Iran conflict introduced an unexpected complication in 2026, pushing two-year fixed rates from approximately 4.25% to 5.42% at a point when many buyers had been anticipating further falls. That rate increase has partially offset the affordability gains that earnings growth would otherwise have delivered, compressing monthly purchasing power for mortgage-dependent buyers in a way that the house price to income ratio alone does not capture.
The more complete picture for buyers is one of genuine but uneven improvement. In markets where house prices have been growing most modestly, the combination of stronger wages and restrained price growth is translating into real improvements in what buyers can afford and what lenders are prepared to offer. The expansion of loan-to-income ratios by several lenders in 2025 and 2026 is a direct response to improving underlying affordability, allowing buyers who meet the criteria to borrow slightly more than they could have done under previous rules.
For buyers who have been waiting on the sidelines while affordability improves, the data supports measured optimism rather than continued deferral. The trajectory is positive and the market conditions, with supply at an eleven-year high and sellers more motivated to engage with credible offers than at any point since 2015, are aligned with buyer interests in a way they have not been for some time.
What it means for sellers
For sellers, the improving affordability picture is constructive context rather than a reason for complacency about pricing. A buyer pool that is gradually becoming better placed to purchase does not automatically translate into a buyer pool willing to pay above-market prices. The same wage growth that is improving affordability is also informing buyers about what represents fair value, and in a market with eleven years' worth of supply available, informed buyers with improving earnings are selective rather than desperate.
The sellers who benefit most from improving affordability are those whose properties are accurately priced within the range that the improving buyer pool can comfortably reach. As the income to house price ratio continues to fall, the number of households who can access a given price bracket grows incrementally. A property priced at the realistic top of what the current buyer pool can afford, rather than above it, captures that expanding pool directly.
The broader significance
The sustained reversal of the 2022 affordability squeeze carries significance beyond individual transactions. Housing affordability is one of the most politically and socially consequential features of the UK economy, and four consecutive years of improvement, however gradual, represent a meaningful shift in the underlying conditions that affect who can participate in the property market and when. The ratio has a long way to travel before it reaches historical norms, but the direction of travel is the most consistently positive it has been in a decade.
Whether you are buying or selling, talk to our team about making the most of the current market