To Value the London market by borough we will maintain consistency with our previous definition which is a simple Price to Earnings Ratio (P/E). As with the County level analysis we will use the Land Registry House Price Index for prices. We’ll stay with calling high house prices bad (the Borough with the highest average house price, unsurprisingly, is Kensington & Chelsea at £1,104,770 and is shown in dark red) and low house prices good (the Borough with the lowest house price is Barking & Dagenham at £213,581 and is dark green) with all other prices shaded between red and green depending on house price. What I find amazing is that Barking & Dagenham, the cheapest Borough, is still 32% more expensive than the England and Wales average.
For Earnings we’ll also stay with the 2012 Annual Survey of Hours and Earnings (ASHE) which provides information about the levels, distribution and make-up of earnings and hours paid for employees within industries, occupations and regions in the UK. To ensure that our Earners and Houses are located within the same Borough we’ll use the Earnings by Place of Residence by Local Authority. We again multiply the data by 52 weeks to convert it to an annual salary. We stay with calling low earnings bad (the lowest average earnings are £19,183 in Newham which surprisingly is only 8% higher than the lowest County which was Blackpool and is shown in dark red) and high earnings good (the highest average earnings are £59,441 in Kensington and Chelsea and is dark green) with all other earnings shaded between red and green depending on earnings.
By combining the two datasets we can see the valuation of houses across the Borough’s of London. The formula is Value equals Price divided by Earnings (P/E) with the result also shown in the table below.
Click to enlarge
A couple of observations:
- Kensington and Chelsea is sitting on a massive valuation of 32.3, more than 4 times that of the national average. I think this is spurious data though and should be ignored. After all a Russian Oligarch or Saudi Prince is hardly going to be earning a salary plus as non-Domiciles they won’t be reporting what they’re earning off shore. The next borough down is Westminster on a still crazy 21.2 however I’m guessing even here there’s plenty of wealthy foreign non Domiciles and those taking part in the rentier society of Great Britain who also don’t have to work.
- The “best value” borough looks to be Bexley however I’d hardly call it good value at 8.7 times average earnings.