Poorer London boroughs suffer biggest declines
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Phenomenal house price growth has put a strain on household finances nationwide, with the house price to income ratio doubling over the past 10 years. London house prices in particular have soared – rising a third faster than the rest of the UK. However, according to the latest research from propertyfinder.com, the average rate of decline in affordability in the capital has kept pace with the rest of the country – the house price/income ratio is just over twice its level of 10 years ago. The ratio in London stands at 8.3 compared to 7.2 for England. The figures mask wide variation in the changing pattern of affordability from borough to borough in London. Rich boroughs see slower growth Traditionally affluent outer boroughs such as Richmond and Barnet have enjoyed strong house price growth, yet the rate of decline in affordability is below both the London and the UK average. Price income ratios in the commuter belt were always high and have been maintained as they remain firm favourites with wealthy working families. Rich inner London boroughs have also seen the house price to income ratio rise more slowly than average – the house price to income ratio in areas such as Kensington and Chelsea, and Westminster has always been high, but in these areas it has less than doubled over the past 10 years. The phenomenal growth in house prices reflects a change in the population as wealthy foreigners have flowed in. Poor boroughs' declining affordability In stark contrast, the poorer inner London boroughs have suffered the fastest decline in affordability. Newham, which 10 years ago was very affordable, has been the worst hit – with the house price to income ratio has more than tripled to 8.5. Waltham Forest and Hackney follow suit. The price to income ratio is almost three times the level of 10 years ago. The 10 boroughs with the fastest decline in affordability are all areas that are traditionally perceived as less affluent. City money is spilling in, pushing up house prices while affordability for existing residents looking to move in these areas is declining more rapidly than anywhere else in London. For them there will be no option but to spread further afield to areas such as Redbridge and Barking. Warren Bright of propertyfinder.com said, “Traditionally affluent inner London boroughs have become special enclaves of the super-rich – in particular foreign money that even the success of the city can’t match. Even the rich have been priced out to other areas and this has had a knock-on effect across the capital - the success of the city in particular, has had a direct impact on affordability in previously cheaper boroughs. Poorer incumbent residents in lower income boroughs are being priced out of the housing market.” Tower Hamlets – an unusual case Tower Hamlets has seen one of the slowest declines in affordability in the capital. This is because the wholesale redevelopment of Docklands changed the housing stock and the population. There, the rapid rise in house prices has been matched by the influx of richer residents, keeping a lid on the growth in the price/income ratio. “Over the longer term, we should see an ebb and flow," Warren says. "If house prices continue to moderate as they are doing, and the city experiences a couple of years of less positive growth, we may see this wave retreating and affordability in some of the newer areas improving more quickly than elsewhere. The next upswing would then push the gentrification further than the first. Only a very serious economic depression would cause a long term and sustainable reversal". |
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