1. Economics
March 14, 2016

Seven maps and charts about London's housing market which will make you sad

By Jonn Elledge

Earlier this year, the National Housing Federation published a report revealing that, as of 2014, the average London home cost £526,000. To put it another way, as of two years ago, the average London home cost roughly 16 times the average London’s salary. This was obviously brilliant news, so you probably noticed the street parties.

But the latest Home Truths report came with rather a lot of other fascinatingly depressing data, exploring wages, rents and house prices across the capital. We’ve been crunching the numbers and enthusiastically attacking maps with crayons, and here’s what we’ve learnt.

1. It’s probably misleading to talk of London like it’s a single housing market

Here’s a bar chart showing the average house price in each borough in 2014. It doesn’t take account of size, or quality, or anything else which tells you what you’re actually getting for your money – it’s a simple average.

Source: National Housing Federation. Click to expand.

In one borough – Barking & Dagenham, out to the east – prices in 2014 were still substantially lower than the England-wide average (£215,648, compared to £265,888). That’s almost affordable.

But Barking it’s very much an outlier. In 14 London boroughs, by 2014, the average price over £500,000. In five it was over £750,000. (And these figures, remember, are over a year old. They’ve risen since.)

Content from our partners
The key role of heat network integration in creating one of London’s most sustainable buildings
The role of green bonds in financing the urban energy transition
The need to grow London's EV infrastructure at speed and scale

So – location matters.

2. South and east are still cheaper than north and west

Here’s the same data as a colour-coded map. The darker the colour, the higher the price.

Source: National Housing Federation. Click to expand.

The “prime London market” – the bits which global oligarchs are most likely to favour when searching for second homes-cum-safe deposit boxes – is still west central London: the West End, Belgravia, Kensington, and so forth. After that, prices are higher in inner north London, and in the western suburbs hard by the river.

The more affordable places are generall in the east, or south. In 2014, the average price in Tower Hamlets – the old East End, and the heart of Docklands – stood at £444,681. That’s crazy by any reasonable standards, by still a good 12 per cent below any other central London borough.

3. Factor in wages, and even the cheap boroughs aren’t that cheap

That chart of average house prices shows a pretty steep increase: the expensive boroughs aren’t just a bit more expensive than the cheap ones, but a lot more.

Factor in local wages, though, and the gradient flattens out a bit. This chart shows average house prices as a multiple of the average wage in the borough.

Source: National Housing Federation. Click to expand.

In other words, even the cheaper boroughs are still pretty expensive for those who actually live in them. A couple buying together, who really stretch themselves with their mortgage, could potentially borrow 4.5 times their joint income – so, if they’re both on average wage, that’d be 9 times the average income.

Factor in the fact they’d need a deposit (LOL) and, if they’re very lucky, couples in three London boroughs might be able to buy the average home in their own borough.

4. No, seriously – south and east are cheaper

This is the same data as a map. Your chances of buying a place in your home borough are substantially increased if you live east or south of the centre.

Source: National Housing Federation. Click to expand.

5. Those prime London boroughs are a world of their own

One last go round with this particular set of data, this time as a scattergraph. The red line is nine times income: so, in an area that falls below it on the graph, an average couple might have half a chance of buying an average home.

Source: National Housing Federation. Click to expand.

Most of London is more expensive than the English average, both in absolute terms and relative to wages. But two east London boroughs, where wages are low, are still relatively affordable.

But look at those outliers on the right: there wages are higher, but prices are much, much higher.

6. Things are better if you’re willing to switch borough. Just, not much better

Of course, we’re being a little disingenuous with some of the above. We’ve been comparing wages and house prices in each borough; but when people are house hunting they’ll probably be willing to look at more than one borough.

So, let’s correct that. One of the things the NHF calculated in their flood of data was the income that you’d need to get a mortgage to buy the average house in each borough in 2014. It’s taken a rather more conservative approach to mortgage borrowing than we have elsewhere in this article: they look at the figures you’d need to get an 80 per cent mortgage, on a multiple of 3.5 times income (not, as we did above, 4.5).

The numbers involved ranged from high but achievable (£49,291 in Barking) to  “LOL You’re shitting me right” (£443,519 – yes, really – in Kensington).

What we really need to do, though, is to put those numbers in context: how achievable are they to the average Londoner? How many times the average wage do you need to be earning, to get a mortgage to buy the average home on the terms laid out above?

Here’s the result. We’ve included the England-wide and London-wide averages, for context:

Source: National Housing Federation. Click to expand.

7. Oh, god

And, what the hell, here’s the same data as a map. Remember: a couple in which both partners earn the average income will between them earn a multiple of twice the average income. That means that, in any borough where the ratio here is higher than two, the average home is off limit to any couple who don’t have at least one high earner or another source of funds.

Source: National Housing Federation. Click to expand.

All this is an over simplification, of course. First time buyers don’t generally set out to buy an “average” home. We’ve also ignored the difficulty of getting hold of a deposit: lower earners with rich and generous parents are probably in a better position than higher earners without them.

Nonetheless, when average homes in most of the capital are entirely off limits to the average workers who live in them, it’s hard to avoid the feeling that something, somewhere, has gone terribly wrong.

Jonn Elledge is the editor of CityMetric, and tweets as @jonnelledge.

Why not like us on Facebook?

This article is from the CityMetric archive: some formatting and images may not be present.
Websites in our network