Only a fifth of households can afford to buy the average new home in the region, says Savills report

Only a fifth of households can afford to buy the average new home in the south-east of England, according to research, which said affordable properties in the region should cost no more than £250,000.

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Savills, the property firm, said the housebuilding industry was on track to deliver the government’s target of 1m new homes by 2020 – but there remained an annual shortfall of 104,000 homes in the areas with the highest demand, London and the south-east.

Savills said much more land had to be released by local planning authorities to lower land values and enable new homes to be sold at an affordable price. It called for more new towns to be built, such as Ebbsfleet in Kent.

To ensure 40% of households can afford a home in the south-east, the property would have to cost no more than £250,000. The average house price in London is £435,000, while the average price in the south-east is £290,000.

Prices are far outstripping earnings. In all areas of London, average house prices are more than 10 times average local earnings; across England, it is more than seven times. The most unaffordable local authorities outside London include Hertsmere, Cambridge, Sevenoaks, Epping Forest, and Windsor and Maidenhead – where average house prices are more than 13 times average local earnings.

Facebook Twitter Pinterest House prices to earnings. Photograph: Savills Research using DCLG, HM Land Registry and CACI

Chris Buckle, a researcher at Savills and co-author of the report, said: “In the south we are still building relatively low volumes in relation to high demand. We need to make new housing much more of a mass-market product.”

The building of affordable homes across the UK halved from 61,050 in 2015 to 29,163 last year, partly owing to a rush to complete properties before the end of the affordable homes programme in March 2015, government figures show.

Construction of affordable homes is expected to rise to 40,000 this year, but this is still below the levels of more than 50,000 in 2011 and 2012, when the for-sale market slumped and housing associations acquired homes that housebuilders were unable to sell. They also bought shared-ownership properties that were not selling and turned them into affordable rentals, said Buckle.

Facebook Twitter Pinterest Net housing completions including conversions. Photograph: Savills Research using DCLG data. 2017 is an estimate

Savills is calling for more “mass-market” sites and highlighted three large locations in areas of high housing demand where homes are cheaper. Picket Twenty in Andover, Hampshire, Berryfields in Aylesbury, Buckinghamshire, and King’s Reach in Biggleswade, Bedfordshire, are each up to 15% cheaper than local market pricing per square foot.

Buckle said affordability was less of an issue in the north of England, where 45% of households were able to buy a home, with quality posing a bigger problem. “You need high-quality housing in the north to attract the businesses and workers,” he said.

He added that purpose-built rental accommodation, known as build to rent, was “gaining traction” in the UK, with 17,000 homes completed, 24,000 under construction and 55,000 in planning.

The impact of Brexit on build costs and skilled labour could push modern construction methods, such as the use of factory-made components, into the mainstream, the report says. Live Verde, the modular housing division of WElink Energy, a renewable energy group, has ambitions for six factories in the UK producing 25,000 homes a year by 2022.