Houses in London are notoriously expensive, coming in at nearly £500,00 ($625,925) on average, but according to new data from Lloyds Bank, it is clear that they are now becoming totally unaffordable for the average person working and living in the capital.
New data from Lloyds Bank showed that across Britain the number of houses sold for at least £1 million rose by 12% in the first half of 2016 compared with the previous year. Out of those properties, 4,238 were purchased in London.
It is perhaps unsurprising that London took a bulk of these £1 million+ properties, but it is a damning indictment of how expensive it has become to live in the capital.
The average price to buy a home in London is huge, compared to earnings, anyways — the last thing the capital needs is data showing that more and more homes are selling for over £1 million.
According to the government’s Office for National Statistics, the average price to buy a property in London is currently at
£489,000, compared with the overall £219,000 figure for the UK overall. (The Land Registry actually has London property prices pegged at over £600,000.) Here is how it compares to different regions in Britain:
The reason why Britain’s house prices continue to rise is because there is a fundamental supply and demand problem. There are too little houses on the market and too many people want to buy them. House builders are not building enough homes, or quickly enough. On top of that, demand is being boosted by the economy’s cheap and available credit. Interest rates fell to 0.25%, which means it is cheaper to borrow money, after being at 0.5% since March 2009.
During ex-Prime Minister David Cameron’s cabinet, the Chancellor George Osborne installed new stamp duty tax rates that was aimed at making those who buy houses over £1 million pay more tax, which was aimed at curbing demand and therefore bringing down prices.
Stamp duty is a tax placed on buyers when they purchase a property in the UK. It is payable on completion of the property. In November’s 2014 Autumn Statement Osborne said second properties would have a 3% stamp duty.
This new fee is applicable to buy-to-let investors and those who are buying a second home. This 3% fee is on top of the extra cost of a new purchase, as of April 2016.
Lloyds Bank data showed that this did have an affect on prices of properties sold for over £1 million. The average price dropped from £1,862,578 to £1,727,327 over a two-year period in Britain.
But that is not a big deal for the average Londoner.
The average Londoner’s salary is only just above £30,000. Being able to afford a property that is classed as “average,” is still barely affordable. Take a look at this chart from HSBC:
So, the fact that more and more homes — well thousands — are continuing to go for over £1 million in the capital, does not bode well for the average worker in the capital. Nor will the average Londoner jump for joy that prices have fallen to £1,727,327, from £1,862,578, for these properties.
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