House prices in London are so high that buyers planning to save for a deposit between now and 2021 will have to save up a whopping £2,300 a month, a new report has suggested.
The Home Truths 2016/17: London report by the National Housing Federation, which campaigns for affordable housing, provides local data on the housing market in England for both buying and renting.
According to the report, a 20% deposit on an average house in London now costs around £113,000 for buyers looking for a mortgage with an 80% loan-to-value (LTV).
Despite Londoners having an average wage of £34,000 a year – the highest average earnings in the country – the average house costs £563,041, which is double the national average and 16.6 times more than the typical London salary.
According to the report, the least affordable areas to buy a house in London are Kensington and Chelsea, where average houses cost almost 35 times local annual salaries, Westminster (32 times) and Camden (27 times).
Londoners looking for more affordable housing to buy should head to Barking and Dagenham, Bexley and Havering, where deposits for houses are all around 10 times typical annual wages in these areas.
The report also looks at how housing associations are providing new homes. In 2016, housing associations in London built more than 11,000 new homes, contributing to more than 45% of new-build in the capital.
Mairead Carroll, external affairs manager at the National Housing Federation, says: “When it comes to the housing crisis, London is in a different world to the rest of England. For too long, not nearly enough affordable homes have been built.
“We want to work with the Mayor to end this housing crisis and have clear ambitions to deliver the affordable homes this city so desperately needs."
“Affordability not limited to homeownership” – renters are also struggling
But it’s not just house buyers who are struggling; the report reveals that renters in London also find themselves with affordability problems. The average monthly rent of £1,727 now uses up 61% of the average London salary.
Commenting on the report, Richard Connolly, chief executive of Rentplus, says: “The revelation that an average mortgage in the city is only affordable for a family with a household income of over £130,000 is truly shocking, particularly when you consider that the average salary in London is around £34,000. Affordability of housing is not limited to homeownership – the average private sector rent is more than double the average for the rest of England, putting further pressure on stretched incomes and reducing housing options for those caught in the rent trap.
“The government’s forthcoming Housing White Paper is eagerly anticipated and will introduce changes to existing planning rules, as well as new initiatives to boost supply and deliver the homes London needs. This in turn could cool the market and stabilise prices. However, the ability to save for a deposit and being able to afford a
mortgage will still remain the main barrier to homeownership for many people. The question is how can we help them fulfil their homeownership aspirations? The answer lies in broadening the range of tenures available to include options, such as rent-to-buy, that offer working families an affordable rent, security of tenure, the ability to save for a deposit and, most importantly, a pathway to homeownership.”