House prices: one London home, or 25 in Scotland
03-17-2014
Survey reveals wide chasm in UK property market, with average family home in most expensive region 25 times the price of one in the cheapest area
Townhouses on Cartwright Gardens, WC1, London Photo: ALAMY
By Jasper Copping, and Caroline McGhie
An average three-bedroom house in the most expensive part of Britain costs 25 times more than an equivalent property in the cheapest area, according to research which illustrates the stark divide in the housing market.
A house price survey covering 376 council areas across the country has found that while a mid-range three bedroom family home in Kensington and Chelsea sells for an average of £1.8 million, in East Ayrshire a similarly-sized property goes for just £72,500.
The data, compiled by Hometrack, property analysts, show how prices in cities such as Edinburgh, Glasgow, Manchester and Birmingham trail those in even the most affordable parts of the capital and the South East. Liverpool, meanwhile, is the cheapest area in England.
The research also shows the high earnings required to afford property in the most expensive areas. To cover a mortgage on a three-bedroom property in Kensington and Chelsea, a family needs an annual pre-tax household income of £462,214. In East Ayrshire, however, they would need to earn just £18,617. Other findings included:
- In 20 areas, including most London boroughs, families needed an income of more than £100,000 to buy a mid-range three-bedroom house;
- In 352 areas, the salary required to buy a three-bedroom house was higher than the national average household income of £28,200;
- The second cheapest area was also in Scotland, in Falkirk, where a three-bedroom home costs £78,000. The third cheapest was Blaenau Gwent, in Wales (£80,000), followed by Liverpool (£82,000).
The analysts looked at the median price for a three-bedroom house in 376 council areas and what buyers would have to spend if they took a 90 per cent repayment mortgage at four per cent, over 25 years. It assumed they could afford to spend 30 per cent of their income on the mortgage.
Experts said the study demonstrated the pressure on earnings for couples and families living in London and the South East. In the capital, boroughs such as Camden — where a household income of £225,329 is needed to buy a mid-range £877,500 home – and Hammersmith — £213,036 for an £829,625 home — are effectively “no go” areas for middle class professionals, as their purchasing power is unable to match wealthy buyers, many of whom are cash-rich foreigners. Data from Savills shows a third of resale transactions in prime locations involve foreign buyers.
Of the top 20 areas with the most expensive three-bedroom homes, 17 were within London. Of the remaining three, two were in Surrey — Elmbridge, which includes the affluent towns of Esher, Walton-on-Thames and Weybridge; and Mole Valley, which covers Dorking and Leatherhead.
The other was St Albans in Hertfordshire. In those areas a three-bedroom house cost between £403,750 and £450,000, requiring annual household incomes of between £103,677 and £115,553.
The South East stands in marked contrast to other major cities, the most expensive of which was Edinburgh (£61,629 for a £240,000 home). As well as Liverpool, Manchester (£34,666 for a £135,000 home) and Birmingham (£36,592 for a £142,500 home) came near the bottom of the list.
The report was published as Mark Carney, the Governor of the Bank of England, faces increased pressure to raise interest rates, to ease tensions in the housing market. A return to 3 per cent by 2017, a six-fold increase from their low of 0.5 per cent, is being called for. Estate agents have called on the Chancellor to ease stamp duty in the budget.
Richard Donnell, of Hometrack, which compiled the report, said the inner London market was being “driven by cash purchases and interest-only mortgages, which aren’t available to everyone”.
He said that down the price ladder, “where both partners are having to work hard to buy, then borrowing or debt becomes an important part of their buying power. This recovery could run out of steam when it gets to Middle England because I’m not sure people want to take on more debt.”
The danger is that interest rate rises would affect those most in need, while not touching those in the highest priced areas where the market is all about cash and equity.
House price rises show no sign of abating. Last week, LSL Property Services said the average price had risen £2,500 in February, the largest rise for 21 months, putting it at a record £257,951.
25 of the areas covered in the survey:
Kensington and Chelsea, London £1.8 million, £462,214
Westminster, London £1.2 million, £308,143
Camden, London £877,500, £225,329
St Albans £415,000, £106,566
Cambridge £318,125, £81,690
Oxford £292,500, £75,110
Edinburgh £240,000, £61,629
Bournemouth £239,950, £61,616
Bath and North East Somerset £227,995, £58,546
Exeter £205,000, £52,641
York £200,000, £51,357
Bristol £185,227, £47,563
Taunton Deane £178,500, £45,836
Cardiff £177,650, £45,618
Norwich £160,000, £41,086
Birmingham £142,500, £36,592
Newcastle upon Tyne £141,775, £36,406
Sheffield £140,000, £35,950
Glasgow £139,750, £35,886
Manchester £135,000, £34,666
Nottingham £109,250, £28,054
Liverpool £82,000, £21,056
Blaenau Gwent £80,000, £20,543
Falkirk £78,000, £20,029
East Ayrshire £72,500, £18,617
Table shows: Council area, median cost of a three bed house in the area, how much income would be required to buy such a property