The ability to buy in the capital is 77% worse than five-years-ago, the report from estate agency Hamptons International found.
London is the only area of England and Wales where affordability has waned in the last five years. In the last year alone, house prices in the capital increased by 17%.
Living costs also rocketed with the report pointing to a 9% increase in childcare costs as having an impact on people’s ability to buy. Wages also dropped by an average of 1.6% in the capital city.
London is also the only area of the country where ability to buy is worse than at the 2007 market peak.
Across the country as a whole the ability to buy dropped by 3% in 2014.
The South West of England saw the biggest increase in ability to buy (6%) during the year. The report said this was due to a more manageable growth in prices and reduced spending on food by those in the region.
Fionnuala Earley, residential researcher director at Hamptons International, said there were increasing pressures on people trying to buy homes, despite low rates.
“Despite some of the lowest mortgage rates on record, falling food and oil prices and some increase in wages, ability to buy is worse than this time last year,” she said.
“This is largely a result of house price growth outperforming incomes. But for working families with children, the growing costs of childcare eats into the amount of money left at the end of the month to service a mortgage.”
