Ratio reveals the most affordable place to buy a home

terrace on hil-2The most affordable borough to buy a home in London is Barking and Dagenham.  A house in this area in the east of London costs a fraction more than seven times local annual earnings.

Barking and Dagenham is the only borough in London with a ratio that is below the average for England. Across England the median house price is 7.49 times the salary for a full time job.

The ratio is calculated by the Department of Communities and Local Government using median house prices rather than the average to avoid distortion due to highs and lows.  These are then compared to median wages locally.

According to this calculation the most affordable boroughs other than Barking and Dagenham are mostly in Outer London.   The median house price is less than 10 times salary in Bexley, Havering, Croydon and Hounslow, and in the Inner London borough of Tower Hamlets.

The least affordable places are central and west London boroughs including Wandsworth, Richmond, Camden, Hammersmith and Fulham and Westminster. But at the top of the scale is Kensington and Chelsea, where the median house price was nearly 40 times the median salary in 2015.

Since the start of the century the ratio in the royal borough has gone up by 178%.  And a similar dramatic change, from lower levels, has happened in Hackney and Waltham Forest, where the ratio has gone from around five times salary to 15 and 13 respectively since 2000.

The change from 2014 to 2015, the most recent years recorded, was highest in Redbridge where the ratio changed by 17% from a little over 10 times salary to just over 12.

In Kensington and Chelsea, the ratio actually fell by 6%, and in Westminster it came down by 1%.

Median House Price to Earnings Ratio 2015
Kensington and Chelsea 39.67
Westminster 24.16
Hammersmith and Fulham 22.33
Camden 19.46
Richmond upon Thames 18.07
Wandsworth 17.68
City of London 17.11
Islington 16.32
Hackney 15.23
Harrow 14.71
Barnet 14.28
Merton 14.27
Ealing 14.25
Haringey 14.11
Kingston upon Thames 13.83
Brent 13.67
Lambeth 13.08
Waltham Forest 13.02
Southwark 12.85
Bromley 12.42
Redbridge 12.21
Enfield 11.64
Lewisham 11.15
Sutton 10.90
Greenwich 10.75
Hillingdon 10.29
Newham 10.12
Hounslow 9.88
Croydon 9.83
Havering 9.78
Bexley 9.41
Tower Hamlets 9.00
Barking and Dagenham 7.19

Source data

See also

More “affordable” homes but the rents prove unaffordable for many

The homes affordability crisis

The Housing Shortage

 

 

Housing the top concern in survey that reveals the worst and best of London

Flats Tom Gowanlockshutterstock_134424665-1-2-1-2

Photo: Tom Gowanlock | Shutterstock.com

A survey of nearly 4,000 Londoners has found that their greatest worry is the cost finding a place to live.

When asked to identify the worst thing about living in the capital 31% of the responses pointed to the cost of a housing and a further 28% to the general cost of living.

Just 8% say they are satisfied with housing in London. Their concerns cover the availability of low cost homes to buy and the high cost of rents. Only 10% believe that the homes being built currently are affordable for a range of people. As revealed by Urbs, much of the housing labelled as “affordable’ is beyond the means of many.

There is also dissatisfaction with the private rental sector. 71% of respondents said there is a lack of affordable private rental property and most are unhappy with the quality of the rentals that are available.

The survey is the second Annual London Survey carried out by City Hall.  It polled 3,861 people online at the end of 2015.  The participants were self-selecting but the data was weighted to reflect the gender, age and ethnic mix of London.

Around half the people polled have lived in the city for more than 20 years.  More than a quarter had lived in their local neighbourhood for the same amount of time.

Their other big concerns shown in the survey included 67% of respondents who said that they were dissatisfied with the fairness of wages, 62% unhappy about the affordability of public transport and 57% dissatisfied with air quality.

But there were some positives to living in the capital.  The thing identified by most was simply the huge variety of things to do.  Access to museums, galleries, theatres and live music emerged as one of the big pluses of London life for many.

Despite the problems, more people like rather that loathe London life.  Overall, 75% said they are satisfied with London as a place to live. But when asked about the future they came back to their chief concern: housing.  The issue most mentioned as the challenge facing the capital is building affordable homes.  It’s an issue that the Mayor himself has called an epic challenge.

Source data

See also

The jobs success and housing failure causing a crisis for the capital

Under 40s locked out of housing market destined to be “generation rent”

More “affordable” homes but the rents prove unaffordable for many

Buying a home gets further out of reach, now 11 times annual salary

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Photo: Tom Gowanlock ┃Shutterstock.com

The cost of a home in London has risen to 11 times the annual salary. This startling statistic is revealed in the data on earnings and house prices from the Office of National Statistics.

Each April the ONS does a survey on earnings and it has just released this date revealing that the median weekly pay in London was £660 or £34,320 annually. The median is the mid point, thus avoiding the distortion of the high and low numbers in calculating an average.

Data from the Land Registry shows that the median house price in London for the same period was £379,000 or 11 times earnings.

Someone earning the median wage who had managed to save perhaps £20,000 as a deposit and then took out a maximum 4.5 times salary mortgage would still only have raised 46% of the cost of the median property. It is hardly surprising therefore that the proportion of homes bought with a mortgage is falling. As reported by Urbs, cash buyers are becoming the dominant group in some areas of central London. They are mostly older people who have sold a more expensive property, or overseas investors.

The ratio of earnings to house prices has been on a steadily upward path since the late 90s, apart from a small dip following the financial crisis of 2008. In 1997 the median house cost 4 times the median salary. That ratio has since more than doubled across the country, and nearly trebled in London.

house to earnings timeline

In some parts of London the figures are even more eye-watering.  A median price home in Wandsworth costs 17 times the median earnings of someone living in the borough. In Westminster it is 22 times and in Kensington and Chelsea the median house price is 38 times salary.

house to earnings map

The data for the rest of the country helps explain why so many people choose to move out of London. In the South East generally the ratio is 9 times earnings. That’s lower than all but the 3 London boroughs on the eastern edge of the city, Havering, Barking and Dagenham and Bexley. In the North East of England a home is just under 5 times annual salary, a ratio not seen in London since the late 90s.

house to earnings national

These ratios mean that buying a property will remain out of reach for many in the capital. The much talked about ‘generation rent’ looks like it’s here to stay.

Source data

See also

What would you do with £1.6 million in cash? Buy a house, of course

The jobs success and housing failure causing a crisis for the capital

Why the London property market is heading back to the 1970s

 

 

What would you do with £1.6 million in cash? Buy a house, of course

nice brick georgian-1-2Cash-rich property buyers are paying an average of £1.6 million for houses in the 3 most central London boroughs, according to an analysis of Land Registry figures by the Council of Mortgage Lenders.

In these 3 boroughs – Kensington and Chelsea, Westminster and City of London – half of all home purchases are in cash rather than mortgages.

On average, higher prices are being paid in cash than with a mortgage for homes in London. But the CML says that is due to the distorting effect of very high prices being paid in cash for a small number of homes in these central areas.  Central London has been the prime area for foreign investors and Kensington and Chelsea tops the table for houses bought as second homes, as reported here.

cash purchase map-2

And this is a tale of 2 Londons as away for the centre cash plays a far less significant role in the property market with around three quarters of homes being bought with a mortgage.

The level of reliance on mortgages is greater in London than any other region of the country. According to CML calculations, in the South West of England 40% of homes are being bought with cash.

cash house purchase uk

Last year the number of cash purchases in England and Wales overtook the level before the financial crisis but the CML says that the number of mortgage-funded purchases is still below the level of 2007.

This may be down to demographics that are sharply on show in London, where increasingly it is older people who can afford to buy a home. Older people have traditionally been more likely to be cash buyers, selling one home to purchase another outright, and data from the Land Registry show that most cash purchases are made by those over 55.

As previously reported by Urbs, the proportion of those who own their own home has fallen for all age groups in London except the over 55s.

The Office for National Statistics forecasts that there will be 1 million more people aged 55-64 in the next 5 years, so the proportion of houses bought for cash is likely to keep rising.

Source data

See also

Under 40s locked out of housing market destined to be “generation rent”

Where are all the young people? The in-out flow of 20-something Londoners

Volume of house sales recovering but still well below pre-crisis levels

Researchers predict London on verge of property price bubble

By JaneArt (Own work) [CC BY-SA 3.0 (http-::creativecommons.org:licenses:by-sa:3.0) or GFDL (http-::www.gnu.org:copyleft:fdl.html)], via Wikimedia Commons-1

Photo by JaneArt (CC BY-SA 3.00)

The London housing market may be entering an “exuberant” phase. This sounds rather exciting until you realise it means that the capital is on the verge of another property price bubble.

Academics at Lancaster University say that the continuing surge in house prices will mean a property bubble by 2017. The last time this happened was at the end of 2007 and it was followed by a price crash when the bubble burst.

Prices in London grew by 11% in the last 12 months. With growth of 2.75% each quarter prices are heading towards what the researchers from the Management School at Lancaster University have called “exuberance’. A bubble of overpriced property will develop if this continues for 18 months.

In their UK Housing Observatory report they say that this could have a ripple effect across the country.   And when the bubble bursts those who bought with big mortgages may be left in negative equity with the value of the loan higher than the value of the property.


See also

London house prices more than 100% higher than rest of UK

House price rises fuel affordability crisis for Londoners

More “affordable” homes but the rents prove unaffordable for many


The team at Lancaster uses a statistical analysis to draw up a ratio between property price and disposable income, which they say is now reaching a critical level. They use property price data from the Nationwide and the cost of living survey by the Office for National Statistics.

They say that tracking the ratio can give an early warning to policy makers.

UK Housing Market Observatory

Majority of the 50,000 second homes are in 4 central boroughs

Kensington Chelsea-2Nearly 50,000 properties in London are designated as second homes and lie empty for much of the time.

The figures are revealed in the Council Tax listings and show more than half of the second homes are in just 4 areas – Kensington and Chelsea, Westminster, Camden and Tower Hamlets.

In Kensington and Chelsea around 1 in 10 dwellings is defined as a second home. Westminster has 6075, or 5% of its housing and there’s a similar proportion in Camden and Tower Hamlets.

Second homes

The highest proportion is in the City of London where 32% of properties are second homes. And outer boroughs such as Enfield, Hillingdon, Hounslow and Merton have over 1,000.

A second home is defined for Council Tax purposes as one that is not the main residence and used for a limited time during the course of a year.

The idea of a pied-a-terre for those living outside the capital with the wealth to afford a small London base is long established. But there’s concern that overseas property buyers are now fuelling the market, purchasing homes as an investment and happy to leave them empty.

This has an impact on the property market, increasing demand, pushing up prices, and contributing to the crisis of cost and affordability in the London.

Source data

See also

Why the London property market is heading back to the 1970s

Half the city’s homes are flats but London is low in the high-rise stakes

The jobs success and housing failure causing a crisis for the capital

 

Why the London property market is heading back to the 1970s

cityscape b&WHome ownership and property rental in London are reverting to the patterns of the 1970s as fewer people can afford to buy a house and more rely on the private rental market to put a roof over their heads.

Owning your own home is a long held aspiration for millions of people and has been far more commonplace in the UK than in continental Europe, where long-term rental is a more regular housing decision. The desire to buy was fuelled by the property boom of the 80s and 90s, assisted by the Right to Buy scheme where tenants were allowed to purchase their council-provided property.

But the data on property tenure across London reveals that trend is being rapidly reversed and the pattern of ownership, private rental, and social housing now resembles London in the 70s.

After climbing to its peak in the 90s owner-occupation had fallen to 50% by 2011. And the squeeze on social housing due to the reduced amount of council housing stock has meant an expansion in the private rental market last seen on this scale in the mid 70s.

Housing tenure type

The profile of private renters is also changing. For years this has been the housing choice of singles and young couples. Increasingly it is the choice for families. A third of the private rental households in London in 2011 had children. 10 years earlier it was just 20%.

Housing tenure profile

This growth of private rental is also being driven by migration, both national and international. The Labour Force Survey in 2014 revealed that 80% of those who have recently moved to London from abroad, and 70% who have moved from other parts of UK, are in private rent homes. This may be a reflection of a temporary decision to move to London to work rather than to settle, but it also reflects the affordability of home ownership in the capital.

The desire to buy appears to be still strong. The English Housing Survey data on resident’s level of satisfaction with their home and the way they have obtained it reveals that 80% of those in private rental were happy with the accommodation, but far fewer where happy about being in the private rental sector.

Housing tenure satisfaction

While the economic circumstances do not make owning a home an option for many, these survey responses indicate a desire to do so, which is perhaps deeply imbedded in the UK culture.

Source data

See also

The jobs success and housing failure causing a crisis for the capital

Families face the biggest premiums for renting homes in the capital

Under 40s locked out of housing market destined to be “generation rent”

The jobs success and housing failure causing a crisis for the capital

roofer colourIn his speech to the Conservative Party conference the Prime Minister, David Cameron, called for a house building “crusade” to deal with the shortage of homes. Nowhere is this felt more severely than in the capital where the success in jobs growth but the failure in house building has led to a structural shortfall.

Since 2002 London has seen a 21% increase in jobs and a 16% rise in population. Over the same period new homes have increased by 10%. And the pressure on housing will continue as London’s population forecast suggests it will grow at 100,000 a year for the next decade.

Housing growth jobs

House building in the capital has been bumping along at around the 20,000 level for the past 10 years. Following the financial crisis of 2008 it dipped sharply. Most of the homes being built are in the private sector, not social housing, which raises issues about affordability.

Housing growth starts

New home starts are climbing back towards where they were 10 years ago, but it is still not enough and the problem is widely acknowledged. In his housing strategy document last year the Mayor of London, Boris Johnson, said that housing was an epic challenge and that the number of new homes being built in the capital would need to double to 42,000 per year for the next 20 years to keep pace with population growth.

The problem in London is more severe than in other comparable cities. Annualised figures for population growth and home building over the past decade show Tokyo and New York in housing surplus, while Paris has an annual shortfall but not to the same level as London

Housing growth cities-2

London relies heavily on housing stock from the last century and before, as reported by Urbs London. A quarter of the homes were built before 1900. Outer London saw a huge house-building boom in the 1920s and 30s but in recent years there has been very little increase in these areas. Figures from the Department for Communities and Local Government, reported by Urbs, show that since 2000 there has been a 11% increase in new dwellings across London (both new builds and conversions) but in 16 outer boroughs this growth is in single figures with just 4% in Sutton and 2% in Merton.

A survey carried out by the housing charity, Shelter, earlier this year showed that most people in London support the building of new homes in their area. And the number of Londoners who strongly support new building was much higher than in England as a whole.

Housing growth support

Despite the political ambition to build and the apparent public support for it, the housing shortfall that London needs to make up will mean that availability and affordability will continue to be severe problems for years to come, and the issue is likely to be a significant battleground in the election for the next Mayor in May 2016.

Source data

See also

Living in the past: The old housing keeping a roof over our heads

More homes packed into built up inner city as growth stalls in outer areas

Booming population will struggle to find a place to live

 

Half the city’s homes are flats but London is low in the high-rise stakes

Council Housing Thamesmead“An Englishman’s home is his castle” is an age-old adage but in London there’s a good chance that castle might be divided into a number of little towers.

Half the homes in London are not single houses but flats within larger buildings, whereas in England 80% of homes are single dwellings.

The data on housing stock reveals that London has about the same proportion homes in terraced houses as the country as a whole. But it has a much smaller proportion of semi-detached houses, and an even smaller proportion of households are in detached houses and bungalows, just 6% in the city.

housing stock by type london englang

Converted houses and re-purposed warehouses make up about at third of the flats in the capital while the remaining two thirds are purpose built.

But despite this prevalence of flats in the housing stock, London is far from being a city of high-rise living compared to other capitals globally.

Just 14% of homes are in buildings higher than 5 stories (the official classification for high-rise). In Tokyo it is more than double that, in New York over 3 times, and the tall classical buildings of European capitals mean that around 60% of the homes in Madrid and Paris are in high-rise dwellings.

housing stock flats global

Source data

See also

Renting in London: 1 bedroom homes

Renting in London: A Studio

Tower Hamlets leads the way for London’s greener homes

Living in the past: The old housing keeping a roof over our heads

mewsLondon is a modern city with a high proportion of very old housing. The population has climbed to a record level but the supply of new homes has failed to keep pace. In the last decade fewer homes were built than in the 1960s and 70s, when the population was shrinking. The capital is still very reliant on housing from the 19th century.

Nearly a quarter of the homes in London were built before 1900. This is especially true for inner London. The 1930s saw a house-building boom as the population rose to a record level that has only just been surpassed. The data for house building,  going back to 1871, shows the surges in the Victorian and Edwardian periods but neither matches the peaks or the 1930s.

housing stock built

The current housing stock reflects how that building activity was spread across the capital. Inner London was the focus in the early 1900s and before. The 1920s and 30s saw the shift to outer London and the development of the suburbs.

housing stock age

Across the capital there are some vastly contrasting borough stories. 65% of housing in Kensington and Chelsea was built before 1900. In Barking and Dagenham it is just 1%. As the map below, produced by the GLA in the Housing in London report, shows the red areas of 1900s housing are inner city, surrounded by the orange of 1930s development.

housing stock map

The blue areas of recent building show the re-development of docklands areas in Tower Hamlets. 28% of the borough’s housing stock was built in the 21st century, which is the highest proportion in London and the UK.

The Mayor, Boris Johnson, has described the need to build more homes as an “epic challenge”. It’s estimated that more than 40,000 more homes are a year required for the next 20 years to meet demand. The housing stock map of London will need a lot more blue zones on the map to reduce the reliance on the dark red legacy of those Victorian builders.

Source data

See also

Booming population will struggle to find a place to live

More homes packed into built up inner city as growth stalls in outer areas

House price rises fuel affordability crisis for Londoners