London house prices: Hackney leads the way with the highest rise in the capital

17 February 2017

  • Gap in average house prices between London and England and Wales has significantly widened over the past 20 years
  • Kensington & Chelsea and Westminster remain most expensive but the capital’s more affordable boroughs record strong growth
  • London house prices now nearly 12 times average earnings
  • Private housing stock in London now worth £1.27 trillion

The North East London Borough of Hackney has seen the steepest growth in house prices in the capital over the past 20 years, according to new research by Lloyds Bank.

The average house price in Hackney has increased £530,700 (702%), from £75,569 in 1996 to £606,269 in 2016. This compares to the average increase of almost 450% for London and 290% in England and Wales over the same period.

The sharp increase in Hackney has seen it shoot 16 places up the list of house price increases for London boroughs, from 28th in 1996 to 12th in 2016.

Homes in Westminster have seen the next largest increase in average prices over the past 20 years, from £190,438 (1996) to £1,424,388 (2016) – an increase of 648% - followed by Southwark (626%) (Table 1).

However, the report also reveals that prices in London’s more affordable boroughs have also recorded strong price growth. Waltham Forest (617%) and Newham (612%) were among the six least expensive boroughs in 1996 but have now moved to one of the top five performing areas.  House prices in these areas have been boosted by the Olympic regeneration programme and improved travel links via the Dockland Light Railway (1987) and the Jubilee Line extension (1999).

Price gap widens across England

Over the past 20 years, the gap in average house prices between London and the average for England and Wales has widened from a difference of £33,834 (or 47%) in 1996 to £299,631 (or 107%) in 2016, with London’s ‘Prime’ boroughs - Kensington & Chelsea, City of Westminster and City of London - having pulled even further apart. Prices are now 5.72 times the England and Wales average, in comparison to 3.34 times in 1996.

The total value of private housing stock in London has also seen a surge. In 1996 it was £201.8 billion, increasing nearly six and a half fold (529%) in 2016 to £1.27 trillion.

Andrew Mason, Lloyds Bank Mortgage Director commented: “The last 20 years have seen substantial growth in house prices in London, especially in the most affluent areas of the City.  The boom years between 1996 and 2008 saw the gap widening between house prices at the top end of the market and those in London’s inner and outer boroughs, creating two distinct markets1  – ‘Prime’ and ‘Mainstream’.

“However, whilst those boroughs at the top end have pulled away considerably from the rest of London and the country in terms of house prices, improved transport links to the city from the outer boroughs and the 2012 Olympic Games has meant that the boroughs directly benefitting from these have seen house price growth outpace the Prime areas in recent years.”

The best performing London Boroughs

Between 1996 and 2016, 20 boroughs have seen average house prices increase by over £400,000. Kensington and Chelsea has seen the largest increase in monetary value, where the average house price has grown from £297,768 to £1,857,287 – an increase of £1,559,518 (524%) and equivalent of £6,498 per month. The next best performer is Westminster where the average value has grown by £1,233,949, followed by Camden (£887,658). These three boroughs along with Hammersmith and Fulham have consistently been London’s five most expensive areas over the past 20 years.

In 1996, average house prices were under £100,000 across nearly two thirds (64%) of London’s boroughs - fast forward 20 years and average prices are now more than £500,000 for over half (58%).  (Table 1)

The ten most expensive places to live in London remain largely unchanged compared to 1996.  The key exceptions are Southwark, which has moved up ten places to ninth spot and Haringey which moved up two places to tenth. Barnet and Kingston-upon-Thames have dropped out of the top ten.

Biggest Movers

Whilst Hackney is the bigger climber on the list, Bromley in Greater London has fallen most in the league table, dropping seven places from 14th in 1996 to 21st in 2016.

London house prices are now nearly 12 times average earnings

Average earnings2 in London have failed to keep pace with the rise in house prices over the past 20 years.  In 1996, the average price to earnings ratio in the capital was 3.9. This had risen to 11.6 in 2016.

The least affordable borough both 20 years ago and today is Camden, with a ratio house price to average earnings of 6.2 in 1996 and 20.0 in 2016.  The most affordable borough in 2016 was Bexley (7.4) followed by Havering (7.7).