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.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
ebooksNow available in paperback
Life and Style
tech
News
The 67P/CG comet as seen from the Philae lander
scienceThe most important scientific breakthroughs of 2014
Arts and Entertainment
Ian McKellen as Gandalf in The Hobbit: The Battle Of The Five Armies
film
Arts and Entertainment
Sarah Koenig, creator of popular podcast Serial, which is to be broadcast by the BBC
tvReview: The secret to the programme's success is that it allows its audience to play detective
News
Ruby Wax has previously written about her mental health problems in her book Sane New World
people
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

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas