New Housing Bubble Fears As Price Gap Widens
Fears of a housing bubble have been underlined by new figures showing some parts of the country now have the most unaffordable property prices in history.
The average home in Kensington and Chelsea is now some 28.9 times the average salary of those living in the borough, according to research by Sky News.
The gulf between local salaries and property prices has doubled since 2009, pushing them further out of reach even of those who live in the area.
The figures will reinforce concerns both within and outside the property market that a bubble is emerging in some parts of Britain.
The average house price across Britain is now around six times the median salary.
This is broadly unchanged from its levels in 2007, before the financial crisis, and is beyond the level defined by property economists as "severely unaffordable".
However, an analysis by Sky News of local-level affordability shows that the gap between prices and incomes is now at unprecedented levels.
In Westminster, the average home is now 19 times the median salary - up from 13 times in 2009.
In Hammersmith and Fulham the ratio - often used by economists to measure affordability - is at 17.5 times salaries, compared with 11.3 in 2009.
However, in other parts of the country, prices are well within reach. In Durham, homes cost 3.5 times the local salaries. In Blackburn prices are 3 times the average salary. Across England and Wales the affordability ratio is 6.1 times.
The Sky News research compares the most recent Land Registry house prices figures with official local earnings figures.
It underlines that for those living in the most expensive areas of London, house prices are now well beyond realistic levels.
In general, mortgage lenders are reluctant to provide potential homebuyers with a loan of more than four to five times their salaries.
According to Demographia, the most unaffordable city in the world last year was Hong Kong, with average property prices equivalent to around 13 times the average salary.
The overall figure for London is now 11.8 times, having risen sharply from 8.6 times in 2011.
The figures come on the same day the Royal Institution of Chartered Surveyors suggested that the Bank of England should consider limiting house price inflation to 5% a year, using its tools to clamp down on lending if prices exceed that.
According to HBOS, house prices across Britain rose by 5.4% in the three months to August.
RICS also suggested that the Bank could start targeting house prices by region - something that the South Korean authorities recently did.
Some, including the Business Secretary, Vince Cable, have warned that if there are further signs of a bubble in parts of the property market, the Government should reconsider the wisdom of the mortgage guarantee scheme at the heart of its Help to Buy programme, which part-funds homebuyers' deposits.