Average house prices reached £496,000 and average earnings were £34,200 in London this year, yet a north London agent says the comparison is not an accurate representation of the capital’s property market

The house price to salary ratio has hit a record high in London, up from last year’s high of 14 times the average income, according to Hometrack.

The average house price in London reached £496,000 in October, and average earnings were £34,200, representing a house price ratio of 14.5 times Londoners’ salaries.

But Simon Deen, director of north London agents Aston Chase, believes these figures do not give a full or comprehensive insight into the capital’s housing market.

He said: “While these figures are correct, the London housing market picture is far more complex and a correlation between the two misrepresents how the marketplace works. Those on average earnings will tend to buy entry level homes in outer London. However in Central London, the ratio between average earnings and pricing is more balanced.

“For example, data from Wealth Insight, the wealth consultancy firm, shows that average earnings for Zone 1 workers in management jobs is actually £94,416, there are 4,549 multi-millionaires living in Central London, and an additional 134 billionaires whose main home is in the capital.

“For new homes developments priced above £5 million across Central London, between 20 per cent to 50 per cent of the buyers, depending on the project, are overseas purchasers. Therefore, a simple comparison between average London prices and average earnings does not give a full or comprehensive insight into the capital’s housing market.”

Hometrack, who released the figures believe instead that the property market in London is set to underperform over the next two to three years as a result of this, with sellers adjusting their property prices to reflect what buyers are prepared to pay.

The property market analysts also reported a per cent drop in the number of mortgaged first-time buyers over the past three years, suggesting that the tax break on stamp duty for first-time buyers, announced in the recent Budget, will have little impact as first-time buyers will still have to pass mortgage affordability stress tests.

Richard Donnell, research and insight director at Hometrack, said: “Unaffordability in London has reached a record high despite a material slowdown in the rate of house price growth over the past year. Lower housing turnover in the capital has led to a tightening of supply in recent months, which has stabilised house price growth. Even so, the gap between average earnings and house prices in the capital has never been wider.”