It’s harder and harder to buy a home in London as average house prices are currently 13 times the average annual salary.
Table of Contents
Statistics
- The average London house price reached a record £521,000 in December
- A lack of properties available to rent means that high prices and rents are expected to continue
History
Owning a house wasn’t always a national obsession. A century ago ¾ of the UK rented the place they lived in. Now, only about 1/3 of the country’s households are renting.
Past events that affected the property market:
- II. World War
After destroying many properties, the country started to rebuild. The government built more than 1 million houses to rent at controlled prices in 6 years.
By 1970, 1 out of 4 people in London lived in council houses.
- Privatization
1979, Margaret Thatcher started a program that allowed families to buy their homes from the government, moving it from the public to the private sector and she also removed the rent cap.
London became much more attractive to landlords, but much worse for tenants.
- 2008 financial crisis
The housing borrowing and lending system have collapsed. The government decided to rescue the banks and the economy by buying some of this bad debt in exchange for stakes in the banks.
The UK had a quick recovery. By 2011, London has bounced back faster than other cities in the world. This meant that London was considered a stable market for real estate investors, who started to purchase several homes in the city.
- Help to Buy scheme
Around 330,000 households have bought homes through the scheme since 2013. The popularity of Help to Buy has pushed house prices even higher.
Prices are raising quicker than salaries
Rents have surged ahead of wage growth and this is making house purchasing very difficult.
2011-2017, rents in England have grown 60% quicker than wages. Rents have increased by 16% while average wages have increased by just 10%.
Average Londoners pay 50% of their salary on rent every month. As current house prices are 13 times higher than the average salary, it’s almost impossible to buy a property.
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