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House pricing and income data: how much can builders afford to charge?

Tuesday 23 January 2018 Catchment AnalysisData Insight & AnalyticsDemographic Data

Dan Parr's picture
By Dan Parr

As the affordability of housing becomes an increasingly contentious point – for developers, buyers and local authorities alike – house builders need to pay ever closer attention to how they craft their pricing strategy. And local income data is only part of the story.

As part of our How We Live: Uncovering Residential Demand e-magazine, we’ve used our Ocean database and Acorn, our geodemographic segmenting tool, to explore average house prices and budgets.

We’ve found that residential builders can go beyond basic statistics about an area’s average income, and create a more realistic pricing strategy, taking account of detailed information about households’ savings and disposable income, too.

So how much can the average mover afford – and how much can you afford to charge?

The rising cost of buying

House prices and incomes vary wildly throughout the UK. Residential builders need to alter their pricing strategy – as well as their development plans – to suit each local area.

Affluent areas – where incomes and savings are higher – could prove be more profitable for developers who are building to sell to the owner-occupier market.

However, as the average house in the UK now costs 7.4 times the average household income, more than 33% of the population can’t afford to get on – or move up – the housing ladder. In areas where buying is unattainable, private rental development and buy-to-let development is likely to be a more viable and profitable strategy.

Of course, this is well-trodden ground for developers – you know how much it costs to buy and rent. But what you might not know is how much the average likely mover really has to spend.

The impact of savings

For example, dramatic differences in house prices mean deposits also play a varying role. A 10% deposit on the average house can set movers back anything from £13,000 to £65,000, depending on the region – so savings have a huge impact on what people can afford.

Using our Ocean database, we’ve used thousands of data points about savings and mortgages to identify how much the average mover is able to spend – and how much a lender is likely to give them.

Some mortgage lenders are willing to offer up to 4.5 times a household’s joint income, which puts the average mortgage at around £175,000. But with the average house costing £286,000, that simply won’t be enough – and that’s before you consider the deposit.

Around 61% of British people have a savings account – but only 14% of them have savings over £10,000. It’s therefore likely that many will be staying in the rental market for years to come.

Creating a data-driven pricing strategy

Unsurprisingly, these prices and percentages are very different in London – where the average house price is now £640,386 – putting only 6% of the population in with a chance of affording to buy.

Get your copy of our new e-magazine to explore more about how the figures stack up for London, and how the averages vary from district to district throughout the UK.

You’ll find a full breakdown of incomes compared to prices, how much buyers in different Acorn groups are able to borrow, and which regions have the most in savings, to help you build a comprehensive pricing strategy that ensures the best return on investment.

But savings are still only one part of the jigsaw. And so we also examine how disposable income varies throughout the UK – and what it’s spent on – giving you unique insight into how much more renters are able to spend on their next home.

Get the e-magazine now and discover how CACI’s data can not only help you outline a rock-solid pricing strategy – wherever and whatever you’re building – but also show you how to identify your target markets, and build the houses they really want.

And if you’re ready to give your next project a data-driven strategy boost, don’t hesitate to give us a call.

As the affordability of housing becomes an increasingly contentious point – for developers, buyers and local authorities alike – house builders need to pay ever closer attention to how they craft their pricing strategy. And local income data is only part of the story. So how much can the average mover afford – and how much can you afford to charge?

House pricing and income data: how much can builders afford to charge?