The average Londoner needs to earn an extra £105,000 a year just to keep up with soaring house prices, a new report has revealed.
And housing charity Shelter's study - 'The house price gap' - shows that the average earner across England as a whole would need a £29,000 pay rise to keep up with escalating property prices.
Looking at wage and house price inflation since 1997 in each area of the country, Shelter calculated what average annual earnings would be if they had risen at the same rate as house prices.
In the London borough of Hackney, the average annual salary would need to increase by over £100,000 to be in line with the astronomical increase in house prices.
Outside of London, the shortage of affordable homes means that people on average wages in Watford and Brighton & Hove would need an extra £47,000 each year to keep up with local house price inflation, and in Manchester £34,000 extra would be needed.
The charity found that there is not a single area in the whole country where wage and house price inflation have remained aligned. Burnley has the smallest gap, where £10,000 would need to be added onto the average salary to put it in line with the rise in house prices.
The latest Census showed a drop in homeownership in England for the first time since records began.
In the late 90s, the average house cost five times the average salary, but by 2012 it had jumped to a massive ten times.
The charity is warning that if house prices are left to rise further this will not only price out future generations hoping for a stable home, it will also makes things even harder for the thousands of families already struggling to keep up with their high housing costs each month.
Shelter is calling on the government to address the shortage of affordable homes as a matter of urgency, and give young people and families who work hard and save money each month the chance of a stable home.
Campbell Robb, Shelter’s chief executive, said: “When you’d need to more than double your salary just to keep up with rising house prices, it is no surprise that the dream of a home of their own is slipping further out of reach for a generation.
“Politicians need to start meeting people halfway by committing to bold solutions that will get more affordable homes built. Otherwise future generations will find themselves priced out of a stable home, however hard they work or save.
“The reality is that successive governments have failed to build the affordable homes that this country needs, and as a result our housing shortage has reached crisis point.
“Despite the fanfare surrounding Help to Buy, pumping money into mortgage guarantee schemes is not the solution. This further inflates prices by increasing demand for an already limited number of homes, and will only make things worse for the next generation of first time buyers. The only solution is to build more affordable homes.”
Tom Copley, London Assembly Labour Group housing spokesperson, said: “Today’s report lays bare the myth the ever-rising house prices are a sign of a healthy housing market, in fact the opposite is true. What’s the use of soaring house prices if it means that people simply cannot get a foot on the housing ladder and are forced into poor conditions in the private rented sector? We need to drastically increase the supply of housing in London, so far the Mayor has completely failed to come anywhere near building the amount of homes we need.
“Schemes like Help to Buy are not the answer as they just push prices up. Rising house prices are not only forcing people into the under-regulated private rented sector, but with soaring private rents as well it is nearly impossible for people to save a deposit. We need the Mayor to directly intervene in the housing market and start building houses himself through City Hall. He is not taking the housing crisis seriously and Londoners are paying the price as a result.”