The headline may come as a surprise.
On 26 March, the Office for National Statistics (ONS) released its Housing Affordability in England and Wales: 2025 report, and several outlets – not least the venerable Financial Times – led with that sort of apparently upbeat headline: that property is at its most affordable since 2015.
Homeownership sometimes feels like a goal balanced on the edge of an ever-receding horizon, so this probably comes as genuinely good, if possibly surprising, news for many people.
But as is so often the case, the headline tells only part of the story, and there is nuance in the numbers. Dig into those, and a more complicated picture emerges – one that deserves a closer look before we declare the housing crisis solved.
The ONS measures housing affordability using a ratio: the median average property price divided by the median annual earnings of full-time workers.
In 2025, the median sale price for a home in England stood at £300,000, against median annual earnings of £39,300. This gives an affordability ratio of 7.6 – i.e. the median property value was 7.6 times greater than the median annual full-time income.
And it is this figure that is down – down from 7.8 in 2024, and the lowest it has been since 2015.
Falling property prices is not the cause. In fact, median property values have risen around 5% since 2021 alone. What has brought the affordability down is wages: median earnings have grown by 25% over the same period, closing the gap between income and property price.
In simple terms, this clearly represents genuine progress. At the peak of 2021, the property value-to-income ratio in England hit levels that risked locking out a generation. The direction of travel has meaningfully reversed from that point.
And some parts of the country are again now back below the ONS's own affordability threshold of ‘five times earnings’. Hyndburn in Lancashire and Kingston upon Hull both came in at a ratio of 4.1 in 2025 – and therefore technically "affordable" by this measure. The North East as a whole sits at 5.0.
Nationally speaking, the numbers do lead us towards cautious optimism. The ONS itself notes that the number of local authority areas with a ratio above 12 – the most acutely unaffordable tier – has more than halved since 2021, when it stood at 76 areas (it is now at 33).
For context, Kensington and Chelsea remains the outlier nationally, with property values at 25.2 times local average incomes – but even that is down sharply from a peak of 44 times income reported by outlets there in 2018.
Structurally speaking, we might look at all this with a sense of growing relief, seeing that the worst of the distortion is easing.
Why, then, this sense of doubt you can no doubt feel creeping through my narrative today? The answer is because Herne Hill, of course, is in London, and London writes its own story.
Let’s explore a little further.
The ONS headline from 26 March 2026 tells us something about the state of the market – but it soon starts to fray at the edges, if not unravel completely, when you start to pick at it.
Why? Because the ONS ratio compares house prices to gross earnings. What it does not – and truthfully, cannot – account for is what has happened to the actual cost of buying and owning a home in the intervening years, particularly in the face of general costs of living.
Consider mortgage rates.
In 2021, when the affordability ratio was stretched to its widest point, the average two-year fixed mortgage rate in the UK sat at around 2.5%. By late 2023, it had surged above 6%. This has been largely attributed to the fallout from the mini-budget under Truss/Kwarteng, but there were other structural pressures at the time.
Those rates, soaring as they did as the Bank of England base rate chased inflation upwards, had a stifling effect on property price rises, but at the same time they brought obvious challenges for households when it came to disposable income.
These rates have come down since, increasingly so through the last few months, and as we entered 2026, all the talk had been of the Bank of England base rate likely to fall further throughout the year, bringing mortgage rates down accordingly.
Recent events have changed this narrative, and as is well documented, we have witnessed average mortgage rates climb – something I wrote about being likely when the Iran/USA/Israel conflict started around a month ago (see article here).
A buyer purchasing a £300,000 home today with a 10% deposit, on a 25-year repayment mortgage at 4.5%, now faces monthly repayments in the region of £1,500. The same purchase at 2020's rates would have cost closer to £1,100 a month.
What does this mean in practice? It means that whilst the affordability ratio may be falling, the actual monthly outgoing is not, and whilst wages have risen in the meantime, we have to recognise that other costs of living have also increased.
This is the problem posed by taking the ONS affordability methodology in isolation. It is useful, and it can be headline-grabbing, but it does not model what a buyer actually feels in their back pocket, nor what they pay each month to service debt.
An improving affordability ratio in an environment of structurally higher rates can and often will be misleading. The gap between salary and house prices may have narrowed, but the gap between salary and the cost of living more broadly has kept pace or widened.
Inflation, even having retreated from its 2022 peak, has permanently repriced a wide basket of everyday goods and services. Groceries, energy, insurance and childcare have all risen substantially faster than wages at various points in the last four years. The 25% earnings growth that the ONS credits with improving affordability ratios has, for many households, been absorbed by higher day-to-day costs.
In short, real disposable income tells a less flattering story than gross median wages.
There is also a broader geopolitical context that the data, collected in 2025, is only just beginning to reflect. That conflict in the Middle East I have referred to already, not to mention continued war in Ukraine, is causing geopolitical tension and uncertainty, energy price volatility and problems with international trade that impact us all. The recalibration of global supply chains continues to create headwinds that impact the economy and naturally this feeds through to impact consumer confidence.
Which prompts an obvious question: how is consumer confidence here in South London?
Despite all of the above – the affordability pressures, rising mortgage rates, interest rate predictions heading into reverse, and an expectation for potentially rocky weeks ahead whilst the situation in Iran remains unresolved – none of this is to say that the market is stagnant or that buyers should sit on their hands.
In fact, quite the opposite. Several data points suggest that activity and sentiment are holding up better than the outward noise would suggest.
HMRC transaction figures showed a 6% uplift in residential property sales between January and February of this year, a meaningful step-up in activity at a time of year when the market is traditionally finding its feet, and indeed a bigger jump than in other recent years.
Knight Frank, undeniably an organisation with a strong grip on market activity with a team of analysts on hand, has reported that numbers of new instructions – that is to say, properties being newly listed for sale – have increased significantly over the first quarter of the year in 2026. It all suggests that sellers are sufficiently keen to commit, in a way that wasn’t matched through much of last year and 2024.
Supply is high and demand is increasing. As we head into the Easter period, traditionally a time of year that sets off a busier period for the property market, this is a healthy signal.
I have already mentioned how mortgage rates have edged upwards in recent weeks, but so far this has not materially dampened activity. Lender appetite remains strong, and the product landscape has diversified considerably. Back in 2023, it looked like thin pickings by comparison. So, whilst it is not as attractive as it might have been four or five weeks ago, the well is definitely not dry by historic measures.
At ground level, sentiment is, by and large, positive. A little cautious maybe, and with half an eye on news headlines, but overall there seems to be a sense out there amongst local people that, until there is a reason not to, people should continue to move home – just as they should continue to go to work, go shopping and go on holiday.
The picture, in short, is one of a market that is functioning, adjusting, and in some respects even improving – but to us as local estate agents we feel it is nevertheless important to recognise that the improvement is more nuanced than the ONS headlines alone convey.
Our job as Herne Hill estate agents is to successfully navigate the home moving process for our buyers and sellers – and this is why it is so crucial to be honest about the state of the market, and to keep a watch on it as things change or, equally, settle down, which we can still hope will happen within the next few weeks.
Data from Savills, as I have written about in the past, has previously revealed the median household income here stands at £149,525 per year. At the same time, Dataloft, which provides us access to a wealth of property data, shows that the average property value in Herne Hill is £749,120.
If we take those two pieces of data together, we can calculate an affordability ratio of 5.0. This is far less, on the face of it, than the ONS measure in terms of its threshold for affordability.
But it is also out of line with the way that the ONS calculates things.
This is because household income is not the same as individual income, and those affordability ratios promoted by the ONS are based on individual earnings of full-time employees, not per household.
We can’t drill down to establish individual earnings in Herne Hill easily – but let’s see what we can look at.
What we do know, from Dataloft, is that 36.11% of households here are made up of families with children – just slightly below the Greater London average of 37.82%. Of that 36.11%, we can’t establish how many of these are households with one or both adults working. And that is if indeed there are even two adults in that household, but there will certainly be a significant number that are. Besides, we know from the same analysis that 17% of local households are couples.
Therefore, what we can assume is that, one way or another, the average individual income here is less than the household income of £149,525 recorded by Savills – and that the true affordability ratio here in SE24 is likely to be higher, in reality, than 5.0.
If you are selling a property in Herne Hill, it is important to bear this in mind at the moment, given what is happening with rates, mortgages, and broader geopolitical events; anything priced a little too high will quickly stagnate in this sort of market.
If you would like to understand what is happening in the local market and what these recent political and international events mean for your sale, the key is to get in touch with a local property expert.
Don’t panic. The market fundamentals remain strong locally, and current numbers show that properties are selling at good prices and in relatively short timeframes compared to late 2025. But with real-terms affordability stretched, despite what the headlines might say, and with further base rate rises and mortgage rate increases now priced in, it is important to have a well-thought-through strategy if you are in the market to move home.
To get that right, please get in touch with us here at Petermans Estate Agents. We would love to help.
We are required by law to conduct anti-money laundering checks on all those selling or buying a property. Whilst we retain responsibility for ensuring checks and any ongoing monitoring are carried out correctly, the initial checks are carried out on our behalf by Lifetime Legal who will contact you once you have agreed to instruct us in your sale or had an offer accepted on a property you wish to buy. The cost of these checks is £60 (incl. VAT), which covers the cost of obtaining relevant data and any manual checks and monitoring which might be required. This fee will need to be paid by you in advance of us publishing your property (in the case of a vendor) or issuing a memorandum of sale (in the case of a buyer), directly to Lifetime Legal, and is non-refundable. We will receive some of the fee taken by Lifetime Legal to compensate for its role in the provision of these checks.