Three ways to look at London’s insane property prices

How much?!
How much?!
Image: Reuters/Luke MacGregor
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In most places in the world, you can buy a lot for £513,000 ($806,000). But in London, that’s the going rate simply for putting a roof over your head.

The latest official data on British property prices will make for difficult reading among house hunters in London. What once looked like the beginning of a decline in the city’s lofty house prices only lasted for about six months; the average home, worth the aforementioned £513,000 in June, is now back within a whisker of its all-time high, set in August last year:

The draw of Britain’s dynamic capital, combined with onerous restrictions on building (pdf), has created a severe shortage of housing. The country’s biggest building companies can’t sell new homes fast enough. As a result, the average house price in London is almost 50% higher than its pre-crisis peak in early 2008, comprehensively decoupling from the rest of the UK over this period.

The average premium to buy a house in London versus the rest of the country has ballooned to £275,000. That’s more than the price of an entire home almost anywhere else in the country.

Buying a house in Britain is expensive at the best of times, with the average house price worth around five times the average person’s annual earnings. In London this ratio now stands at a wallet-busting nine times earnings, making it among the least affordable major markets in the world.