London property costs 14.2 times the average annual salary in the city – making it the most unaffordable city to buy for locals in the UK, Hometrack’s UK Cities Index has revealed.
Other cities where property is expensive compared to earnings is Cambridge, Oxford and Bournemouth, with a price to earnings ratio of 13.8, 13.4 and 10.2.
Cities with the lowest price to earnings ratio are Glasgow at 3.7, Liverpool at 4.4 and Newcastle at 4.8.
Richard Donnell, insight director at Hometrack, said: “In cities where affordability levels are stretched fewer households are able to participate in the market and this reduces levels of turnover and leads to lower levels of house price growth.
“This process is underway in London where the annual rate of growth is close to its lowest level for three years and where the top end of the market is already registering falling prices.
“The Autumn Statement focused on the longer term challenges of addressing housing supply.
“This will have limited impact on the current profile of housing affordability in the near term which will be dictated by market forces and households’ expectations for jobs and the cost of borrowing.”
He added that house price growth is starting to shift from the South to the Midlands and North of England.
Despite the apparent disparity between house prices and property in London the year-on-year growth rate has slowed to its lowest level for three years at 9.1%, while it is expected to slow further in the next six to 12 months.
The city with the highest house price growth was Bristol (10.6%), while other strong cities for growth were Portsmouth (8.3%) and Cardiff (8.0%).
At the bottom of the index Aberdeen in Scotland has seen prices fall by 8.1%, as the city has majorly suffered from the falling global oil price.
Meanwhile Belfast and Newcastle only rose by 2.1% and 3.1% year-on-year.
Stephen Smith, director, Legal & General Housing Partnerships, said: “This ongoing rise in house prices is certainly not surprising.
“The market is still suffering from a supply crisis, and with the price of property increasing well above wage inflation, first time buyers will continue to struggle to make their first step onto the housing ladder.
“Such disparity between the cost of homeownership and wages is highlighted in these figures from Hometrack.”
He added: “Fortunately, there has been some good news this week.
“The extra support from the government announced in Wednesday’s Autumn Statement, including £1.4bn in funding for 40,000 affordable homes, will certainly help to address the struggle many first time buyers face.
“Measures like these will increase supply, hopefully subduing the stratospheric rise in house prices.
“However, the housing crisis is a long term problem that ultimately demands a long term solution.
“With the agenda now set by the Chancellor, it’s time for housebuilders to roll up their sleeves and make good on the government’s promise of building a housing market that is fair for all.”