London house prices to hit £400,000

The average value of a home in London is set to hit £400,000 in the next five years, new figures suggest.

On the back of a 34 per cent rise, by 2011 average house prices in the capital will be £392,000, the London Housing Federation reports.

"London is facing a housing timebomb," said Berwyn Kinsey, head of the London Housing Federation - which represents London's 400 housing associations.

"House prices, already sky-high, are expected to rocket by another £100,000 over the next five years, making it even harder for people to get on the housing ladder."

The average home in London already costs almost £300,000 - 8.8 times the average salary in the capital (£33,373). This means to buy an average home in London, first-time buyers need a salary of £79,379.

But this situation is set to worsen.

While wages are set to rise by between 4.1 and 4.4 per cent a year, house prices are set to increase at the faster rate of almost seven per cent a year for the next five years.

This will see the average salary in the capital increase to £41,000 by 2011 - but average house prices will rise to be worth some 9.5 times this amount.

"Londoners are increasingly left with the choice of expensive rental accommodation, living in house shares or with parents or leaving the capital altogether," Mr Kinsey said.

"Many thousands more are homeless or living in overcrowded conditions as demand for affordable housing outstrips supply.

"The irony is that even as we are building more affordable homes, they are being sold through right to buy."

While 11,549 affordable homes were sold last year through the right to buy, only around 6,000 were built, the London Housing Federation said.

Currently the least affordable place in the capital is Camden, north London. In this borough an average property costs 10.7 times the average income.