West Midlands to see highest house price growth in England

The West Midlands is predicted to see the highest house price inflation over the next two years of all UK regions, behind only Wales.

PwC’s latest UK Economic Outlook projects the region will see average house price growth of 3.4% in 2019 and 4.2% in 2020, compared to the UK average of 1.2% and 2.1%.

The average house price in the West Midlands is estimated to rise from £194,000 in 2018 to around £223,000 by 2022 according to PwC’s projections.

This comes at a time when the cost of private renting is proving to be a significant challenge for tenants, with those working in certain key public sector professions increasingly unable to afford rent.

PwC’s report warns that this will potentially lead to a shortage of employees, such as NHS workers, teachers and police offers, in these regions, impeding both economic and social mobility.

Using the conventional benchmark that renting must cost less than 30% of gross annual income for it to be considered affordable, the report finds that an employee would need an annual salary of £23,800 to afford the median private rent in the UK, up £400 from 2017/18. This means that the country’s median private rent has just crossed over the 30% rental affordability threshold. The picture varies by region; Southern England, especially London, has rents way above this, making it difficult for key professions to live there.

Currently, workers in the West Midlands between 22-29 years of age are spending 27% of their monthly earnings on rent, just below the 30% threshold that is generally considered affordable.

Matthew Hammond, Midlands region chairman for PwC, said: “House price inflation in the 12 months to April 2019 was strong in both the East and West Midlands at 2.9% and 2.2% respectively.  The Midlands was in the top five of the UK regions for the underlying house price growth. Growth rates are forecast to continue strongly through 2019 and 2020 at between 3.1% and 4.1%, with the medium term average for 2021 and 2022 settling at the lower end of this range at 3.2%.

“Whilst average house prices are higher across London, the South East and South West, by 2022, if the growth is as forecast, average house prices will break through the £200k threshold, reaching £223,000 in the West Midlands and £214,000 in the East Midlands by 2022.

“By comparison the average London house price could reach £508,000 by 2022 and £344,000 across the South East, making affordability of rented property a disproportionate cost of almost 40% of the median salary for 22-29 year olds in the South East and more than 50% in London.”

Hammond says that sffordability remains key in rented segments of the market. In the Midlands with its young population in major cities, for 22-29 year olds, rental costs are estimated to account for between 23% and 27% of median salary.

The relative affordability compared with London and the South East, alongside growth across key strategic sectors of the economy, is driving the increasingly popular choice of locating and developing careers across the Midlands.  Medium and longer term infrastructure investment is creating conditions for good growth for the Midlands’ cities, fuelling investment.

He said: “Several groups of key public sector skilled workers are experiencing a different aspect of what we should all consider a genuine housing crisis.  Many of those we are seeing hardest hit by the affordability of housing are people who are integral to our public services, especially in many regional cities where we have high concentrations of public service workers spending increasing proportions of net income on rent.

“Increased levels of supply of good quality homes and a wide array of property types and price points across the Midlands is key to ensuring inclusive economic growth.”

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