We have recently been reporting on the status of London’s housing situation, with the expensive price tags of properties propelling the capital at the top of the heap of the most priciest location to live in the United Kingdom; and so, the Telegraph has highlighted in a recent article on their website that London has indeed become the least affordable city out of Britain.
It mentions that the affordability in the capital has reached a new record low, with house prices being up 14.2 times higher than the average salary. This happens to be double the UK’s average ratio, and according to the property investment research firm Hometrack, the average has shot up by 86% due to increasing house prices since 2009, outperforming the growth of salaries by a wide margin. Other cities have reported a similar difference in their house prices to salary growth ratio, with Cambridge, Oxford and Bristol all recording a rise exceeding the national average, as well as it being higher than the average of their respective cities over the last 12 years. Hometrack also noted that most other UK cities have a house-to-earnings ratio that matches up with the long-run average, meaning that there is room left for potential price growth.
Cities such as Glasgow, Liverpool and Newcastle have ratios that are purportedly below the average spanning the last 12 years – 4.8 times the average salary or below. This may be due in part to the prices in these cities not bouncing back from their lowest point as far back as 2009, when the financial crash occurred. Sheffield had an 18% increase in house prices since the post-downturn low. The report from Hometrack also documented in their cities index that the house prices in the biggest 20 cities increased 8.4% in a year from October 2015 to this October, with Bristol recording the highest level of house price growth at 10.6%. The article goes on to mention that despite this, the Midlands and the north of England are hotspots where high levels of house price growth are found, wherein affordability is not constraining inflation.
Even though London’s house prices growth has continued to catapult, its annual growth has slowed by a rate of 9%, the lowest it has reached in 3 years, and experts predict it will fall further next year as a result of the changes to the stamp duty and the lack of affordability. House prices in Central London have not grown at all in the past year. In order to afford a property in London, it seems people will have to work longer hours or try to get a higher paying job. But is this trend going to help or hinder the housing crisis in future?