An interactive map using earnings data has revealed the most affordable boroughs to buy a home in London, with Tower Hamlets taking the top spot.
In the east London borough, the median-priced home of £455,200 costs just 4.91 times the average salary of households. Greenwich and Croydon, both south of the river, follow closely, with median home values of £451,900 and £430,100 respectively, both at 5.26 times the average household salary.
Although the average home value is cheaper in Croydon compared to Tower Hamlets, affordability was calculated based on the house price to household earnings ratio. Residents of Croydon were found to have earned less relative to the value of their homes. Household income was calculated based on the average earnings of two full-time workers, according to data provided by Zoopla.
Top five most affordable boroughs
Southwark ranks fourth, with the median property price just shy of £500,000, sitting at 5.36 times the average household income. Lambeth completes the top five, where the median home costs £525,900, 5.39 times the average income.
At the other end of the scale, Kensington and Chelsea was named the least affordable borough to buy a home. While the estimated annual household income was found to be £106,000, the median home value was £1,007,200, 9.5 times household earnings.
Least affordable areas and broader trends
Richmond upon Thames was the second least affordable borough, followed by Harrow and Waltham Forest. Camden in north London was the fifth least affordable, with home values averaging £723,600.
The analysis said London remains the least affordable region, with homes valued at 6.11 times the average household earnings. In comparison, homes in the north east of England were valued at 2.64 times local household earnings. In Britain's most affordable town, Shildon, homes cost just 1.15 times the annual household earnings.
Impact of interest rates and market outlook
The findings come as the Bank of England increases interest rates to 4%, meaning hundreds of thousands of homeowners are set to face an immediate hike in mortgage bills. The increase could equate to an extra £600 over the course of a year, potentially shrinking the housing market as demand stagnates and Londoners turn to renting over buying.
Richard Donnell, Executive Director at Zoopla, said: “House prices have been rising more slowly than incomes, helping to improve housing affordability, but higher mortgage rates continue to offset some of these gains by increasing the monthly cost of buying a home.
“Affordability varies widely across the country, with many towns in northern England and Scotland offering much better value relative to local household earnings. However, lower house prices don't always mean it's easier to buy, as access to employment, deposits and mortgage costs remain important considerations.
“Buyers have more homes to choose from than a year ago, and there is greater scope to negotiate on price, particularly in southern England. Anyone considering a move should take a fresh look at what they can afford and what's available locally. Expanding a search to neighbouring towns could make a meaningful difference to their buying options.”
