Affordability of London house prices hits record low
As house prices in London reach 14.2 times the average salary, the affordability of the capital’s homes have sunk to a record low.
The reported figures are more than twice that of the UK’s average price to salary ratio. According to Hometrack research, it has been pushed up by an 86% increase in the prices of homes since 2009, a figure which is far in excess of salary growth.
Home price to earning ratios are also above the national in average in Bristol, Cambridge and Oxford, and in comparison to the average over the last 12 years, the current average across the cities is much higher.
For most other UK cities, the ratio of house price to earnings is in line with the long term average trend. As a result, there is left over room for price growth.
The ratios for Newcastle, Liverpool and Glasgow are all below the 12 year average, of 4.8 times the average salary or lower. A partial cause of this may be that in these cities, house prices have not bounced back that far from the financial crisis, when the lowest point was hit. As an example, Sheffield house prices are just 18% higher than their price following the downturn.
For the 20 largest cities, Hometrack’s cities index observed that house prices grew by 8.4% over a year to October. The highest level of growth was recorded in Bristol, which reached 10.6%.
For London, the annual rate of house price growth has slowed to its lowest in three years – 9%. As a result of the stamp duty changes and reduced affordability, this rate is predicted to fall further over the next year. House prices have not increased at all over the past year for properties in central London.