Housing costs 'pushing Londoners to the bottom of the league for living standards'

Londoners are being pushed to the bottom of the league table for living standards by the cost of housing, new research revealed today.

Despite incomes in the capital outstripping most of the country since 2008, the apparent prosperity vanishes once the surge of house prices and rents are factored in, said the Resolution Foundation think tank.

The latest official house price figures out today showed London prices surged by 9.4 per cent in the year to December, taking the average house price in the capital to a record £536,000.

Prices rose even faster in the East of England, at 9.7 per cent, and by 8.8 per cent in the South East. The rise in other areas of the country was just 5.1 per cent.

The UK average increase was 6.7 per cent, which was down from 7.7 per cent in the year to November.

But while the increases have created paper fortunes for some London homeowners, the new research suggests most people in the capital have been made worse off.

Strong recent employment growth and low inflation had pushed typical household incomes in London up by 2.9 per cent higher than with before the financial crash of 2008, said a Resolution Foundation report. But once the cost of homes was included, living standards fell 3.9 per cent since 2008 – which the foundation said was by far the biggest fall anywhere in the UK.

“Londoners have experienced some of the strongest income growth in recent years, with typical household incomes now well above pre-crash levels,” said Matthew Whittaker, chief economist at the think tank.

“But the wider picture on living standards changes completely once housing costs are included. On this measure living standards have actually fallen over the last seven years, and by far more than anywhere else in the UK.”

He said the capital’s “terrible track record” was partly due to the falling levels of home ownership, coupled with inflation-busting increases rental costs.