House price growth has outstripped income growth—but not by much

A graph shared on Facebook and Twitter shows average UK house prices quadrupling since 1990, while the average household income rose by about half. This is a misleading comparison because while the income figures have been adjusted for inflation, the house price figures haven’t. In cash terms, average income has tripled during this time, which is a much larger rise than the chart suggests.. 

The graph gives its source as the Land Registry—a government department registering property and land ownership.The graph is correct that the Land Registry shows the average UK residential property price (including flats) was £57,726 in June 1990. 

According to the Land Registry, the equivalent figure for June 2020 was £234,947. The Facebook graph quotes a slightly higher figure of £237,834, which has also been reported by the government. (The differences are likely due to the way in which House Price Index data is updated as transactions are completed.) 

The graph also says the average UK household income for 2020 is £37,100. This is the correct figure for the mean UK disposable household income (income after taxes and benefits) for the financial year ending April 2020. (The exact figure is £37,108.) 

It is the figure for income in 1990— £20,448—that skews the graph.

We can’t find this exact number in the official data from the Office for National Statistics. It is close to the median figure for average household disposable income in 1990, which is £20,249. But in order to compare it with the 2020 figure, we have to use the mean average, which is higher, at £24,458.

More importantly, both of these figures have been adjusted for inflation, to reflect the fact that a pound in 1990 was more valuable than it is now. Yet the house price figures have not been adjusted for inflation. This means that when the meme compared the growth in income with the growth in house prices using these measures, it was not comparing like with like. 

In order to do that, we have to convert the income figure for 1990 back to its original cash value at the time. This was a much lower number, £12,353, which would make the bar chart in this post look quite different.

In cash terms, in 1990, the average household would therefore have had a disposable household income of £12,353, at a time when the average house cost about £57,726.

By comparison, in 2020, the average household income was £37,108 and the average house price was about £234,947.

During the last 30 years, therefore, the average household income has tripled, but the average house price has quadrupled. This may have made buying a house less affordable (although this is also affected by changing interest rates), but not to the extent that the chart on this post suggested.