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London housing affordability hits new lows

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Prospective buyers in London face another blow, as data by Hometrack showed the house price to salary ratio has hit a record high.

Even following recent softness in the market, the average house price in London reached £496,000 in October, against average earnings of £34,200. This means the average house costs 14.5 times the average salary. Similar ratios were seen in Oxford and Cambridge (12.6 and 14.3 respectively).

The statistics show that affordability may be a greater problem than stamp duty, even after this month’s Budget changes.

Hometrack said the gap between earnings and house prices may lead London to underperform other areas round the country. The fastest growing cities were Manchester and Birmingham, which grew 7.9% and 7.4% respectively, overtaking Edinburgh, which had the fastest-rising prices last month. Data from Barclays Mortgages showed Ladywood in Birmingham saw the highest house price growth in the country, at 17%.

London prices are up 3% year-on-year, but this has mostly been driven by outer London, while inner London has remained flat.

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