Not all postcodes are created equal when it comes to house prices. In recent years, many people have found themselves progressively priced out of the buying market, and in certain cases, of the rental market as well. Peabody New Homes compares the cost of a square foot of property in different parts of England.
How much house can I afford in London?
It’s not a surprise that affording a house in the capital isn’t accessible to most people. The price for one square foot in London averaged £769 in 2024, and unfortunately, fewer boroughs offer competitive prices when buying outright.
When looking to buy in the capital, prospective homeowners will have to compromise on how much space they will get for their money. If you were to pay the current English average house price for a London property, you'd be buying a 397 square home which is slightly below the average size for a one-bed home.
What London boroughs are the most affordable?
If finding a way to live in the capital without breaking the bank is a challenge, there are still a few areas that you can target. When stepping onto the property ladder, 7 boroughs on the outer edges offer properties below the city average.
You can find a home:
- 37% below the London average in Barking and Dagenham
- 23% below in Newham
- 21% below in Croydon
- 8% below in Southwark
- 7.6% below in Greenwich
For people looking to buy their first home outright, Barking and Dagenham offer an average property price of £315,275 (from 2024 data), which is well below the London average of £499,663.
To assess housing affordability, it can be useful to look into the affordability ratio of an area. This corresponds to the number of times buyers will be spending their annual earnings to buy a home. When considering that the median earnings in London is £44,370, the affordability ratio for Barking and Dagenham is 7.11, compared to 11.26 for the average London house price.
What price of home can I afford across England?
Recent data from Zoopla highlights the stark gap between house prices across different parts of the UK. Unsurprisingly, London remains the most expensive region, with an average price of £585 per square foot. However, buyers searching in more affordable pockets like Erith (DA8), eastern Dagenham (RM10), and Belvedere (DA17) can still find homes for under £400 per square foot.
Outside the capital, the South East is the next most expensive region, averaging £375 per square foot, while the South West is significantly cheaper at £295.
To find prices below £300 per square foot, prospective homeowners will need to look further north or inland - with the West Midlands averaging £240, and the North East offering the lowest price per square foot at just £145.
What is the cheapest area to buy in England?
For those looking to maximise space without overspending, heading north is still one of the smartest moves. The North East remains the most affordable region in the country, with an average price of just £145 per square foot, well below the national average of £300.
But it's not just the low prices that make the North East attractive. Homes here are relatively spacious, and based on typical sizes, that means the average house price comes in the North East is around £189,000 offering some of the best value per square foot in the UK.
Why are houses so unaffordable?
Incomes have increased over the last 25 years, but not quite at the same pace as house prices. The reason why previous generations were able to buy a home with less difficulty is that the gap between annual salary and house prices was much smaller. The ONS highlighted in its 2024 Housing Affordability in England and Wales report that full-time employees in England could expect to spend around 7.7 times their annual earnings to buy a home, based on a median house price of £290,000 and median earnings of £37,600. While this marks an improvement from the ratio of 8.4 in 2023, affordability still remains a significant challenge for many buyers.
Evolution of the housing affordability ratio according to the ONS
What is the housing affordability crisis caused by?
Several factors contribute to the housing affordability crisis. One major factor is the imbalance between housing supply and demand, particularly in highly desirable urban areas like London. Limited availability of land for development, coupled with strict planning regulations, has restricted the construction of new housing units which only worsens the situation.
The issue of housing affordability is linked to broader economic trends, such as low interest rates and a growing population. Low interest rates make borrowing more attractive, driving up demand for housing loans and consequently pushing prices higher.
Government policies and taxation also play a significant role in shaping housing affordability. Measures such as stamp duty, planning regulations, and housing benefit policies influence both the demand and supply sides of the housing market, impacting prices and accessibility for prospective buyers and renters alike.
As the housing affordability crisis persists, alternative ways to buy are being offered to people who cannot afford to buy a home outright. Prospective buyers can look into Shared Ownership to step onto the property ladder without needing a bigger salary. You can use our Shared Ownership Affordability Calculator to assess what kind of home you could purchase. Another option for Londoners is London Living Rent which allows people to pay less rent in order to save enough money for a deposit to then buy.
Frequently Asked Questions about house affordability in London
House affordability varies significantly by region. London is the most expensive, with average prices around £585 per square foot, while the North East is the most affordable at just £145 per square foot. Areas in the South East and the South West also have higher-than-average costs, whereas regions like the West Midlands and North West offer better value for money. Affordability is often determined by the cost per square foot and how that compares to local earnings.
Several factors determine how much house you can afford, including:
- Property prices per square foot (which vary widely by region and borough, see above)
- Your annual income and savings
- Interest rates and mortgage terms
- Government schemes like Shared Ownership or London Living Rent
- Cost of living and local economic conditions
Higher property prices in sought-after areas like central London often mean buyers must settle for smaller homes unless their income is significantly above average.
Average salary plays a critical role in housing affordability. The affordability ratio, which compares the average house price to average annual earnings, shows how many years of income would be needed to purchase a home.
For example, in London, the average affordability ratio is 11.26, meaning a buyer would need over 11 years of income to afford the average property.
