Unaffordability of London homes is 'off the scale'

Overall UK home buyers spent 8.3 times their average earnings to buy a home in 2023, according to the ONS

Terraced houses in north London. Figures show more than 80 per cent of areas in the UK capital have affordability ratios above 12. Getty Images
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London remains the most unaffordable place in the UK to buy a home, according to new figures from the Office for National Statistics (ONS).

The annual survey of house prices and average earnings paints a picture of wide-ranging home unaffordability in the UK.

"In 2023, full-time employees in England could expect to spend around 8.3 times their annual earnings buying a home," the ONS said.

In parts of London the ratio is much higher, though not as high as in previous years. For example, in Kensington and Chelsea, the ratio is 34.3 (38.4 in 2022), in Westminster it is 19.7 (22 in 2022) and in Richmond upon Thames it is 18.4 (20.7 in 2022).

However, while drops in house prices in London and rising salaries brought ratios down fractionally, almost all areas of London, with one exception being the borough of Tower Hamlets (8.5), still have affordability ratios above 10. The ONS considers five to be the "affordability threshold".

"Some 82 per cent of London LAs (local authorities) had affordability ratios above 12 in 2023," the ONS said.

Overall in England, the ONS figures show that houses in England and Wales have not met the affordability threshold since 2002, when house prices were closest to five times the average earnings.

The number of areas with the least affordable housing – a ratio of 12 or more – has fallen from its peak of 76 in 2021 to 60 in 2023 (19 per cent of total areas). The ONS said much of the fall was due to readjustment from anomalies in the housing market and average wages that arose during the pandemic.

'Pulling away'

"Since 2007, London's average affordability has "pulled away" from other regions, becoming substantially less affordable," the ONS said.

The ONS noted that the most affordable areas of London remained less affordable than the least affordable parts of north-east England, despite falling house prices and wage inflation in 2023.

Overall in England and Wales, housing affordability improved in 237 areas (75 per cent), worsened in 77 (24 per cent), and stayed the same in the remaining one per cent, compared with 2022, according to the ONS.

"It's hard to see affordability increasing any time soon unless we have the mother of all property crashes," Simon Bridgland, director at Release Freedom told Newspage.

"Average wage growth as it has happened over the last year is just being used to support the sinking ship of living costs, not create further mortgage affordability.

"The dream of home ownership in the UK for many on average salaries has been smashed to pieces by the ever-hungry appetite of those who have affordability and have gone on to own extra rental property."

'Expensive, cramped and ageing'

Also on Monday, the Resolution Foundation think tank released analysis which it said showed the UK's housing stock is overpriced and under-delivering when compared to that of other advanced countries.

"When it comes to housing, UK households are getting an inferior product in terms of both quantity and quality," the Foundation's report said.

The report calculated that homes in England have less average floor space per person (38 square metres) than many similar countries, including the US (66 square metres), Germany (46 square metres), France (43 square metres) and Japan (40 square metres).

In addition, the housing stock in the UK is much older, with 38 per cent of homes built before 1946. That compares with 21 per cent in Italy and 11 per cent in Spain.

"Britain is one of many countries apparently in the midst of a housing crisis, and it can be difficult to separate rhetoric from reality," said Adam Corlett, principal economist at the Resolution Foundation.

"But by looking at housing costs, floor space and wider issues of quality, we find that the UK's expensive, cramped and ageing housing stock offers the worst value for money of any advanced economy.

"Britain's housing crisis is decades in the making, with successive governments failing to build enough new homes and modernise our existing stock. That now has to change."

Updated: March 25, 2024, 12:20 PM