Housing costs in London now deemed excessively high for all income brackets.
London, a city renowned for its vibrant culture and economic prowess, is facing a housing affordability crisis that even high earners find challenging to navigate. According to Eamonn Prendergast, Chartered Financial Adviser at Palantir Financial Planning, housing remains fundamentally unaffordable across much of the UK.
The Office for National Statistics (ONS) has classified London housing as unaffordable for every income decile. Housing is considered 'affordable' by the ONS if it costs a maximum of five times your salary. However, for someone living in London with an average income, the affordability ratio stands at 13.5. In comparison, the average English home costs 7.9 times the average salary, as per ONS data.
The high house prices in London are primarily due to high demand combined with a limited supply of building land, creating a shortage of available housing. This shortage especially affects young families and low-income groups, driving prices up in this competitive market.
Lenders have been proactive in finding new ways to solve the affordability crisis in 2025, but house prices remain extremely high relative to incomes. Lower interest rates and longer-term mortgages are contributing to the continuing rise in house prices. Ballooning land values due to intense competition have further inflated prices.
The total gifts and loans from the Bank of Mum and Dad to home buyers in 2023 was £9.4bn, nearly doubling in the last five years. This trend indicates the increasing reliance on family support to secure a home, particularly in London's expensive market.
Despite the pressure, housing prices in London remain remarkably resilient. A shift to first-time buyers looking outside the capital for their homes has put pressure on prices in London. Annual house price inflation in London was lowest in the UK but still rose by 0.7% in the 12 months to July 2025.
Katy Eatenton, Mortgage & Protection Specialist at Lifetime Wealth Management, stated that England is officially the land of the unaffordable. The highest 10% of earners in England face a house-price-to-income ratio of 5.8, while the lowest 10% face a ratio of over 34.
The affordability crisis in London's housing market is a complex issue, influenced by factors such as population growth, foreign investment, and the lack of building. As the city continues to evolve, finding solutions to address this issue will be crucial to ensuring London remains an accessible city for all its residents.
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