90 percent of us live on but 5 percent of the land.

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[Anna Glypta]

Well the data from Nationwide show the ratio is currently above the long-term (1981-2012) average:

 

http://monevator.com/wp-content/uploads/2011/12/house-price-earnings-graph.jpg

 

I have also seen graphs for the last 100 years which show the same trend (in that case I believe the long-term ratio is 3.5 not 4.0 as it appears to be for the last 30 years)

 

Its worth noting a lot of the homeowners I know bought in mid-90's when the ratio was well below the long-term average. So luck with being born at the right time was a big factor, not just working hard (which lots of people do now and cannot afford houses in the same areas similar people bought in the past). Thats why they often admit now they would not be able to buy their own house if they suddenly were a lot younger earning the current typical salary.

 

Thats all pretty accademic. That ratio ignores the fact that most women now work and contribute to family income.

The fact is that house prices go up and down depending on market forces, so if folk are willing and able to pay more it drives up prices. If they aren't prices come down. So the ability to pay is the main factor and always has been.

What has distorted the market and contributed to the financial crisis is easy credit and 120% mortgages. It just made houses artificially more affordable until the market readjusted by driving up prices.

Since the crash those mortgages have gone. The market is again readjusting and pretty soon we will be back to the norm again.