House Prices vs Income: How the Price-to-Income Ratio Shapes Rent vs Buy
Short answer
The house price-to-income ratio divides a typical home price by typical annual income. Around 3 to 5 is traditionally considered affordable; in 2025 the average home in England cost 7.6 times median full-time earnings, and London 10.6. Lenders cap borrowing with income multiples, such as 4 times in Ireland for first-time buyers, which decides how much house you can actually buy.
Key takeaways
- Price-to-income ratio = median home price Ă· median annual income. It measures affordability, not value.
- ONS data show England's ratio at 7.6 in 2025, the lowest since 2015, with London at 10.6 and the North East at 5.0.
- Demographia's 2026 report put Hong Kong at 14.1 and Sydney at 14.0, the two least affordable major markets it covers.
- Lending caps include 4x income for Irish first-time buyers, a 6x debt-to-income threshold in New Zealand, and a 4.5x high-LTI limit in the UK.
- A high price-to-income ratio with a moderate price-to-rent ratio often means renting is easier, but buying can still pay.
How do house prices compare with income?
The house price-to-income ratio divides a typical home price by typical annual income, showing how many years of gross pay a home costs. Historically, around 3 to 5 was considered affordable; in 2025 the average home in England cost 7.6 times median full-time earnings, and in London 10.6 times, according to the Office for National Statistics. The ratio measures how hard it is to buy, which is a different question from whether buying beats renting.
Comparing house prices vs income is the starting point for both national affordability debates and your own budget. This guide explains the metric, gives verified figures, sets out the lending rules that turn income into borrowing power, and shows how it fits into a rent vs buy decision.
What is the house price-to-income ratio?
House price-to-income ratio = median home price Ă· median annual income
Different publishers define the inputs differently, so always check which one you are reading:
| Publisher | Price measure | Income measure |
|---|---|---|
| ONS (England and Wales) | Median house price | Median gross annual earnings of full-time employees (individual) |
| Demographia “median multiple” | Median house price | Median gross household income |
| Cotality (Australia) | Median dwelling value | Median gross household income |
| OECD | House price index | Disposable income per head, as an index to a base year |
Individual-earnings ratios are higher than household-income ratios for the same market, because many households have two earners. The OECD series shows change over time rather than a level you can compare between countries.
Verified house price-to-income figures
England and Wales (ONS, 2025)
The ONS Housing affordability in England and Wales: 2025 bulletin reported:
- England: median home ÂŁ300,000, median full-time earnings ÂŁ39,300, ratio 7.6, the lowest since 2015.
- Wales: median home ÂŁ213,000, earnings ÂŁ35,800, ratio 6.0.
- London: the highest region, at 10.6. North East: the lowest, at 5.0.
- Only 23 of 318 local authorities had a ratio of 5 or below.
Since 2021, median earnings in England and Wales have grown about 25% while median house prices have grown about 5%, which is why affordability has improved even as homes remain expensive.
Global cities (Demographia, 2026)
The 2026 edition of Demographia International Housing Affordability, published by the Frontier Centre for Public Policy, ranked Hong Kong least affordable for a 16th consecutive year with a median multiple of 14.1, followed by Sydney at 14.0. Vancouver, at 10.8, was fifth. Demographia classes a median multiple of 9 or more as “impossibly unaffordable”. Hong Kong’s figure has fallen from 23.2 in 2021 as prices declined.
Australia (Cotality)
Cotality reported Australia’s national dwelling value-to-income ratio at a record 8.2 in the September 2025 quarter, against a 20-year average of 6.8, with Sydney at about 10.
Because these sources use different definitions, compare like with like rather than mixing them in one league table.
How much house can I afford based on income? Lending rules by country
Market ratios describe the average. What determines your purchase price is how much a lender will advance, which regulators cap in different ways.
| Country | Main income-based rule | Source |
|---|---|---|
| United Kingdom | Loans of 4.5x income or more are “high LTI”; such lending is limited to 15% of new mortgages, now measured across the market rather than lender by lender | Bank of England / PRA PS19/26 |
| Ireland | Up to 4x gross income for first-time buyers, 3.5x for second and subsequent buyers; 90% loan-to-value | Central Bank of Ireland |
| New Zealand | Debt-to-income above 6x (owner-occupiers) or 7x (investors) is limited to 20% of each bank’s new lending | Reserve Bank of New Zealand |
| Canada | Uninsured borrowers must qualify at the higher of their contract rate + 2 points or 5.25% | OSFI |
| France | Lenders follow the HCSF guideline of a maximum 35% debt-service-to-income ratio | Haut Conseil de Stabilité Financière |
| United States | No national income multiple; lenders assess debt-to-income ratios, and a common rule of thumb keeps housing costs near 28% of gross income | Lender guidelines |
These limits allow exceptions and change over time, so confirm current rules with a lender.
Worked examples using our market defaults
What income does it take to borrow enough for each default home?
- UK: ÂŁ290,000 home, 10% deposit, loan ÂŁ261,000. At 4.5x, that needs about ÂŁ58,000 of household income.
- Ireland: €380,000 home, 10% deposit, loan €342,000. A first-time buyer at 4x needs about €85,500 gross income.
- New Zealand: NZ$800,000 home, 20% deposit, loan NZ$640,000. Staying at or below 6x DTI needs about NZ$106,700 (with no other debt).
- Canada: C$700,000 home, 20% down, loan C$560,000 at 4.4%. The payment is about C$3,081 a month, but the stress test assesses it at 6.4%, about C$3,746 a month (using a simple monthly-compounding approximation).
- United States: $420,000 home, 20% down, 6.3% rate. The mortgage payment plus property tax and insurance is about $2,657 a month. To keep that at 28% of gross income needs roughly $114,000 a year.
- France: €330,000 home, 10% deposit, 3.2% over 25 years: about €1,439 a month. Under the 35% guideline, that implies net monthly income of roughly €4,100, before other debts.
The deposit still has to come from savings, which is often the harder hurdle when prices are many times income.
Why price-to-income matters for rent vs buy
The price-to-income ratio and the price-to-rent ratio answer different questions:
- Price-to-income: can you afford to buy, and how stretched would you be?
- Price-to-rent: if you can afford it, is buying better value than renting?
They combine in four ways:
| Price-to-income | Price-to-rent | What it usually means |
|---|---|---|
| Low | Low | Buying is affordable and good value; buying often wins |
| High | Low | Hard to get in, but rents are high too; buying pays if you can manage the deposit and payment |
| Low | High | Easy to buy, but renting is cheaper; renting often wins |
| High | High | Hard to buy and poor value; renting and investing usually wins |
Hong Kong and Sydney sit in the high-high corner on both Demographia’s median multiple and our price-to-rent defaults (33.3 and 34.9). Our calculator’s defaults show renting ahead in both after ten years.
Stretching is the hidden risk
Borrowing at the maximum multiple leaves little margin. If rates rise at your next fixed-rate renewal, or your income dips, a mortgage that was affordable can become a strain. A household borrowing 4.5 times income at a 4.3% rate pays roughly 29% of gross income on the mortgage alone over 25 years; at 6% it is closer to 35%. If buying would require borrowing the most a lender allows, renting for longer while saving a bigger deposit can be the more resilient choice, even where buying wins on paper. See how interest rates affect rent vs buy for the sensitivity.
How to use income to set your own budget
- Find your borrowing cap. Apply your country’s income multiple or debt-to-income limit, or ask a lender for an agreement in principle.
- Add your deposit. Cap plus deposit, minus buying costs, gives a ceiling price.
- Price the full monthly cost. Include property tax, insurance, maintenance and service charges. Our guide to the hidden costs of owning a home lists them.
- Test a higher rate. Add one to two points to see whether the payment still works.
- Compare with renting. Run the numbers in the rent vs buy calculator for your country to see whether buying also wins on value.
The bottom line
House prices vs income tells you how hard it is to buy and how stretched you might be. It does not tell you whether buying beats renting. Use income rules to set a realistic ceiling, avoid borrowing at the limit when rates are volatile, and then let a full rent vs buy comparison decide whether buying is worth it at that price.
This article is general information, not personal financial advice.
Run your own numbers
Every rule of thumb above depends on your rent, price, rate and how long you stay. Use the Rent vs Buy Calculator by Country below — it starts with local defaults you can change.