(Bloomberg) -- Properties in London saw the biggest improvement in affordability in England over the last five years but still remain eye-wateringly expensive compared to earnings.

The Office for National Statistics said that the 10 biggest declines in affordability ratios all came in areas in London or bordering the capital after its house prices underperformed the rest of the UK in recent years.

However, residents in the capital still faced the most pricey properties in the country, according to the data for the year to September 2023. 

Kensington and Chelsea in West London was the least affordable area, with the median price paid for a home over 34 times average annual earnings, followed by Westminster and the Richmond upon Thames. The data was based on earnings of people working in the area rather than those of residents.

The figures underscore an improving backdrop for buyers who are enjoying huge wage increases at a time of stagnant house price growth. At the same time, they show the challenge facing the government to help more people onto the property ladder, a theme likely to feature prominently in the general election expected this year.

London was the worst-performing region of England for house prices in 2023, suffering a near 5% fall that is allowing affordability to improve. The city saw house prices soar by almost 80% in the 2010s, making it impossible for many young buyers to afford a home.  

Nonetheless, London helped to drive another improvement in housing affordability in England, continuing to reverse the pandemic surge in house prices.

House prices were 8.26 times average earnings in 2023, the second back-to-back decrease after the record high of 9.06 in 2021. It is a bigger improvement in affordability over two years than was even seen in the financial crisis when house prices slumped. 

In London, prices were 11.95 times earnings, down from 12.38 the previous year. 

The median price of properties sold in the upmarket Knightsbridge and Belgravia — a wealthy part of central London that is home to the Harrods department store — was £3 million. In Brompton and Hans Town in Kensington and Chelsea it reached £2.45 million.

Kensington and Chelsea, Westminster, Hackney and Camden are among the areas to see the biggest affordability improvement in the last five years.

The cheapest average price was £50,500 in an area south of Easington Colliery, a former coal mining town in County Durham.

“The latest ONS figures indicates a positive shift, with the house price to earnings ratio showing signs of stabilisation, which is a step in the right direction for prospective homeowners,” said Arjan Verbeek, chief executive of lender Perenna. 

“The overall earnings gap is still very high – and it’s almost surreal to see that in the late 1990s, house prices were only roughly 3.5 times more expensive than average annual earnings.”

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