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

Flats Tom Gowanlock shutterstock_134424665-1-2

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

 

 

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

 

House prices rise by 9% in the past 12 months

terrace brick-2House prices in London have risen by over 9% year-on-year, that’s almost twice the national average.

The most recent sales data for June from the Land Registry shows prices continuing to increase across the country, with London commuter regions of the South East and East also seeing substantial gains in the past 12 months.

land reg June annual

The North East had the greatest monthly rise from May to June 2015, pushing London into second place with 1.8% growth in the period. Prices fell last month in some parts of the country.

Land reg June monthly

The latest data shows that the average London house price was £481,820. That is 2.5 times the national average of £181.619 and nearly twice the prices of the second highest region, the South East.

land reg june price

As reported by Urbs, the level of house prices is causing an affordability crisis for many Londoners and younger buyers are struggling to get onto the property ladder.

Source data

 See also

House price rises fuel affordability crisis for Londoners

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

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

 

 

 

 

 

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

Photo © Thinglass | Dreamstime.com

Photo: © Thinglass | Dreamstime.com

Homebuyers in London are paying a premium of more than 100% to buy a home in the capital compared with the average price in the rest of the UK.

Figures for the year to March from the Office for National Statistics show that the average cost of a house in London was £498,000. The average price in the rest of the UK is less than half that at £236,000.  The cheapest place to buy a home in the UK remains Northern Ireland where the average price is £145,000.

The gap between London and the rest of the country has widened in the past 10 years.  In 2005 the price difference on the average price was 50% or about £100,000.  The figures peaked in the middle of last year with a difference of 120%. The March figures show that average prices are going up again for the first time in 6 months after slipping back from a high in the August 2014.

House price premium

The London premium is a little less pronounced for first time buyers.  The average cost of a first home in the capital is £387,000 compared to £206,000 elsewhere in the UK.

The data from the ONS covers the period before the electon campaign.  Numbers released in the coming months will reveal whether the prospect of a so-called mansion tax proposed by Labour and the Liberal Democrats had a dampening effect on the London property market.

Source date

See also

Rents rise by 31% in 10 years