London facing a 'housing timebomb'

The average house price in London is set to rocket to almost £400,000 by 2011, new research has showed.

Figures from the London Housing Federation suggest that the cost of a typical home in the capital is set to increase by 34% over the next five years.

It has led the federation - which represents London's 400 housing associations - to warn of a looming "housing timebomb" in the city, with the gulf between house prices and salaries growing wider than ever.

It predicts that while average property prices are expected to increase from just under £300,000 at present to £392,000 by 2011, average wages will go up by just 4.1% to 4.4% each year.

This will, according to the report, worsen a housing situation that is already dire for many Londoners.

The average home in the capital currently costs 8.8 times the average salary and in Camden - London's least affordable borough according to the report - a home costs 10.7 times the average income.

Prospective homebuyers need a gross annual income of £79,379 to get a mortgage for an average-value home in the capital, the report noted, pricing many professionals out of the market.

The federation said the situation looks set to deteriorate, with the population in the capital expected to increase by 800,000 over the next decade, placing further pressure on affordable housing.

Berwyn Kinsey, head of the federation, said: "House prices, already sky-high, are expected to rocket by another £100,000 over the next five years, making it even harder for people to get on the housing ladder.

Londoners are increasingly left with the choice of expensive rental accommodation, living in house shares or with parents, or leaving the capital altogether."

The federation is calling on the Government to make housing a priority in its 2007 Comprehensive Spending Review.