House Price to Income Ratio Guide
Understand what the house price to income ratio means, how to calculate it, and how your local market compares to standard affordability benchmarks.
Understanding the Affordability Ratio
The house price to income ratio is one of the simplest and most widely used ways to measure whether housing in a given area is affordable. This guide explains how it works, how to calculate your own, and how to read the result.
How to Calculate the Ratio
Five steps from raw numbers to a meaningful benchmark
Find the Property Price
Use the price of a specific property you’re considering, or the local median or average house price for a market-level comparison.
Establish Gross Annual Income
Add up gross annual income before tax and deductions. For a joint mortgage application, combine both applicants’ incomes.
Divide Price by Income
Divide the property price by the gross annual income figure. The result is expressed as a multiple, such as 6.5x income.
Compare Against Affordability Bands
Check the resulting ratio against standard bands, from affordable through to severely unaffordable, to understand the local market context.
Consider Lender Borrowing Limits
Remember that mortgage lenders typically cap borrowing at around 4 to 4.5 times income, which may be lower than the market’s overall price to income ratio.
Ratio Calculator
Enter a price and income for an instant result
Standard Affordability Bands
A summary of how house price to income ratios are typically classified, based on commonly cited international housing affordability research.
| Ratio Range | Classification | What It Means |
|---|---|---|
| 3.0x or below | Affordable | Housing costs sit within reach of typical local incomes. |
| 3.1x – 4.0x | Moderately Unaffordable | Buyers may need a larger deposit or longer mortgage term. |
| 4.1x – 5.0x | Seriously Unaffordable | Home ownership becomes difficult without high income or savings. |
| 5.1x – 8.9x | Severely Unaffordable | Typical of major cities with high demand and limited supply. |
| 9.0x and above | Extremely Unaffordable | Seen in the world’s most expensive housing markets. |
House Price to Income FAQ
Answers to the most frequently asked questions about the house price to income ratio and housing affordability.
The house price to income ratio compares the price of a property to gross annual income, calculated by dividing the property price by annual income. It is a widely used measure of housing affordability across regions and countries.
A ratio of 3 or below is generally considered affordable, 3 to 5 is moderately unaffordable, and anything above 5 is considered seriously or severely unaffordable, based on widely used international affordability benchmarks.
The house price to income ratio measures overall market affordability using the full purchase price, while a mortgage income multiple is the amount a lender will actually let you borrow, typically 4 to 4.5 times income, before any deposit is applied.
House prices have generally grown faster than wages due to constrained housing supply, low interest rates over much of the 2010s, population growth in urban areas, and increased investment demand, widening the ratio between prices and incomes.