London house prices soar by 17.7% in just one year

 

Economics Editor

London house prices shot up by almost double the value of London salaries over the past year, official figures have showed.

The Office for National Statistics said average prices in the capital soared by 17.7 per cent to £458,000 in the year to February. That £63,000 increase over 12 months compares with average earnings for workers in the capital of just £36,000 a year.

This means many people who own houses in London will have seen their homes “earn” almost twice what they did at work over the past 12 months.

But soaring prices are making life ever more difficult for younger people in London who want to buy homes, as house values rise quicker than their capacity to save for a mortgage down-payment.

“Apart from the lucky few who can rely on the bank of mum and dad, our runaway housing market is forcing a generation to watch a home of their own become an increasingly distant dream, no matter how hard they work or save” save Campbell Robb of Shelter.

Alex Hilton of Generation Rent said the latest figures were also “miserable news” for Britain’s estimated nine million renters, three quarters of whom say they want to buy homes. “Higher prices only means even higher rents as new landlords try to make a return on their increasingly expensive investments” he said.

The Nationwide building society reports that the ratio of first-time-buyer house prices to earnings in London reached a record eight times in the first quarter of 2014. That’s up from 6.7 times a year ago and higher than the previous peak of seven times that was recorded in late 2007.

The jump in London’s prices was the biggest annual increase in seven years, but across the UK house prices also continued to accelerate, rising by 9.7 per cent in the year to February. There were signs of the capital’s boom spreading out across the country too with prices up in every region. Scottish prices were 2.4 per cent higher than a year earlier. In Northern Ireland they were up 2.8 per cent and 5.3 per cent in Wales. The North East of England recorded increases of 2.9 per cent and in the North West prices rose 5.9 per cent. Outside London prices were strongest in the South East, rising by eight per cent.


Many commentators have voiced fears of a potentially dangerous bubble in housing and the regulators at the Bank of England have said they are monitoring the situation closely. The Chancellor George Osborne has also been accused of irresponsibility by stoking demand for housing through his Help to Buy mortgage subsidies, introduced last year. But the government’s housing minister, Kris Hopkins, insisted the housing market was still in line with fundamentals. “Mortgage lending activity in the housing market remains below the historic average and relative to earnings, median house prices across England are around the same level they were in 2005,” he said.

Across the UK the average house price to earnings ratio currently stands at 5.5 per cent. That is below the 6.5 percent ratio recorded at the peak in 2007, but it remains well above the long-term average of 4.2.

In an interview with The Independent earlier this month the Business Secretary Vince Cable said prices were being driven higher by a “chronic imbalance” between housing supply and housing demand. New housing starts in England hit 123,000 in 2013, the highest level in five years. But the annual supply was still estimated to be more than 100,000 below the 250,000 plus levels of construction necessary to meet the demand resulting from new household formation.

Life and Style
Social media users in Mexico who commented on cartel violence have been killed in the past
techTweets not showing up or loading this morning, users say
Sport
premier leagueLive: All the latest news and scores from today's matches
News
newsMcKamey Manor says 'there is no escape until the tour is completed'
News
politics
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
Fans of Dulwich Hamlet FC at their ground Champion Hill
footballFans are rejecting the £2,000 season tickets, officious stewarding, and airline-stadium sponsorship
News
Shami Chakrabarti
people
Arts and Entertainment
Benedict Cumberbatch has refused to deny his involvement in the upcoming new Star Wars film
filmBenedict Cumberbatch reignites Star Wars 7 rumours
Sport
football
News
news
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Data Analyst/Planning and Performance – Surrey – Up to £35k

£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker