The problem with the traditional affordability model
The most quoted measure of affordability compares house prices to annual earnings (as above). It is simple, widely understood, and easy to track over time. Yet simplicity often comes at the cost of accuracy, and this is one of those cases.
This method assumes homes are bought outright, ignoring the role of mortgage finance entirely. It takes no account of interest rates, mortgage terms, or the reality that most Richmond homes are purchased using two incomes rather than one. In short, it reflects a theoretical world rather than the one buyers actually live in.
More importantly, it does not reflect how decisions are made. Buyers do not sit around the kitchen table debating price-to-income ratios. They ask a far more practical question, can we afford the monthly payments?
A more meaningful way to measure housing affordability?
If we want to understand affordability properly, we need to shift the lens. The true measure is not the headline price of a home, but the cost of funding it. In other words, how much of a household’s take-home pay is required to cover the mortgage. That is the number that determines whether a purchase is possible, not a theoretical ratio built on house prices and annual income.
Affordability is not about what homes cost. It is about what they cost you each month. When you look at the market through that lens, the story changes quite dramatically. The numbers begin to reflect lived experience rather than abstract comparisons, and that is where the real insight sits.
If you really want to test affordability in its purest form, you must look at first-time buyers. They are the most exposed to changes in affordability because they typically have the smallest deposits and therefore the highest loan-to-value mortgages. That means their monthly payments take up a larger proportion of their household income, making them the most sensitive barometer of whether the market is genuinely affordable or not.
And in Richmond, when you analyse affordability through that first-time buyer lens, the results are not what most people expect.
Richmond affordability, then and now
Let us go back to 2007, a time many still remember clearly. The average Richmond house price was £370,000, much lower than todays at £720,000. On the surface, 2007 felt like a more accessible property market. Yet when we examine affordability through the lens of monthly cost, a different picture emerges.
In 2007, a typical Richmond first-time buyer household was committing a significant portion of its income to mortgage payments.
62% of Richmond first-time buyers take-home pay in 2007 went on mortgage payments.
Fast forward to today, and despite higher Richmond house prices, that burden has eased.
53% of Richmond first-time buyers take-home pay goes on mortgage payments.
That is not a small improvement. It represents a meaningful shift in household affordability. Buyers today are committing a smaller share of their income to owning a home than they were nearly two decades ago.
A longer-term perspective, the lesson from 1989
To fully appreciate this, it is worth stepping back even further. In the late 1980s, mortgage rates reached levels that would be almost unthinkable today. Interest rates approached 15%, placing enormous strain on household finances.
The result was stark.
79% of Richmond first-time buyers take-home pay in 1989 went on mortgage payments.
Three quarters of a household’s income was required to service a mortgage. By comparison, today’s levels, while still challenging, are considerably more manageable. The idea that affordability has never been worse simply does not align with the historical data.
Why affordability has improved
This shift is not accidental. It is the result of several structural changes in the housing and mortgage markets over the past few decades. Interest rates, while higher than the ultra-low levels of pandemic years, remain far below the extremes of the late 1980s. Mortgage products have evolved, with longer terms allowing payments to be spread more manageably over time.
At the same time, real household incomes have grown, even after accounting for inflation. The mortgage market itself has become more competitive, offering a wider range of products tailored to different buyer circumstances. All of these factors combine to reduce the monthly cost of borrowing relative to income.
And yet, much of the public conversation remains anchored to a measure that overlooks these realities.
The first-time buyer deposit challenge, perception versus reality
None of this is to suggest that buying a home is easy. For many Richmond first-time buyers, the deposit remains the most significant hurdle. Headlines often focus on average deposit figures, which can appear daunting and, in some cases, unattainable.
However, averages reflect behaviour, not necessity. Many buyers choose to put down larger deposits to secure better mortgage rates, often with family support. That does not mean those levels are required for entry into the market.
In reality, 95% mortgages remain a viable option for the vast majority of Richmond buyers with stable incomes and good credit histories. While a larger deposit can improve affordability further, the absence of one does not automatically place homeownership beyond reach.
The role of rents in shaping affordability decisions
There is another dynamic at play that is often overlooked. Nationally, rents have risen by 22.8% in the last 3 years alone, placing increasing pressure on tenants. In many cases, the monthly cost of renting is now comparable to, or even exceeds, that of a mortgage on a similar property.
The difference lies in what those payments achieve. Mortgage payments contribute towards ownership, building equity over time. Rent, by contrast, provides no long-term financial return and offers little certainty, with increases often occurring year after year.
When viewed through the lens of monthly cost, the decision between renting and owning becomes less about headline prices and more about financial trajectory.
Reframing the Richmond affordability debate
So where does this leave us?
The ONS data is valuable. It highlights genuine improvements in affordability when measured against earnings. Yet it captures only part of the picture. By focusing solely on price-to-income ratios, it overlooks the mechanism through which most homes are actually purchased.
When affordability is measured as a proportion of take-home pay, the narrative becomes more nuanced. It reveals that, while challenges remain, particularly around deposits, the ongoing cost of homeownership is often more manageable than many believe.
This does not mean the Richmond property market is easy. It does mean it is more accessible than the headlines suggest.
For years, the dominant narrative has been one of exclusion for first-time buyers. That the Richmond housing ladder has been pulled up, and that those very same Richmond first-time buyers face an insurmountable challenge. And yes, there is some truth in that, particularly when it comes to saving for a deposit. Yet the data, when examined through the lens of real-world affordability, tells a more balanced story. Not one of simplicity or ease, but one of possibility. And sometimes, a shift in how we measure something is enough to change how we understand it entirely.
I hope you found this informative. I would love to hear from you should you have any questions.
Best wishes
Sara
