House price affordability in London
A short post, but I thought it would be interesting to plot a dataset showing the ratio of median house price to median earnings onto a map to look at affordability.
The bandings are:
· 0-3.5 green
· 3.5-7 Yellow
· 7-8 Orange
· 8+ Red
The bandings were chosen on the basis of ‘traditional’ mortgage lending multipliers, so 3.5x earnings, then 2 people @3.5x earnings (though generally this would be 3x earnings of a couple, but being generous here), then 2 people @3.5x earnings with a 10 per cent deposit and then everything above. I have ignored stamp duty!
Firstly, including a traditional single person multiplier was pointless, but at least the lack of green makes the situation for singles apparent.
The highest median price to earnings ratio is 27x in Kensington and Chelsea (remember these are medians, not mean!). The lowest is Barking and Dagenham at 5.87. LBTH is 6.48, indicating that an ‘average’ person in LBTH could only afford to buy the ‘average’ home if they are a couple. There are only 9 out of 32 boroughs where two people earning the median wage could buy a median property with a 10% deposit, assuming a conservative lending multiple.
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