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London home values surpass 14 times earnings for first time
[LONDON] Homes in London are less affordable than ever as low mortgage rates drive up prices by allowing buyers to borrow more.
It now costs the average Londoner 14.2 times their annual gross salary of 33,720 pounds (S$60,038) to purchase a home, the highest level on record and more than double the ratio for the UK as a whole, according to data compiled by Hometrack.
The annual rate of house-price growth in the capital was 9.1 per cent in October, almost the lowest in three years, the property researcher said.
Home prices in London have surged 86 per cent since 2009 as the supply of new stock failed to meet demand from Britons and overseas investors.
The spiraling values led Chancellor of the Exchequer Philip Hammond to set aside more than three billion pounds on Wednesday to help construct more than 90,000 affordable homes in the UK capital by 2021. The average price of a house in London is now 482,800 pounds, according to Hometrack.
"Overseas buyers looking for a safe haven, robust demand from domestic investors seeking protection from ultra low interest rates and huge demand from potential homeowners has caused prices to surge," Richard Donnell, a director at Hometrack, said by telephone.
"The jump is way in excess of the increase in peoples' earnings, hence lots of people are simply priced out of London now."
The researcher defines London as the 46 boroughs in and around the UK capital. Hometrack's valuation model for houses and apartments is used by 17 of the top 20 UK lenders, according to the firm's website.