London’s housing market has gained high prices, but a study has shown that the city has lost out on economic benefits. The house prices have grown so high that it is causing a loss of spending and higher wage expenses. The Office for National Statistics (ONS) reported that the average house price has been running more than 46% above the pre-crisis peak at £525,000. Rents have been reported to have risen by one third in the past decade.

London did escape the loss of property values as did other areas of the UK. While some areas had declines of housing prices in the double digits, London usually had a gain even if it was slight during some periods.

The study by London First and CEBR has estimated that the cost to the economy due to high house prices has been more than £1 billion a year as well as the inability to create thousands of jobs. Mortgage and rents are absorbing money that would otherwise be spent and/or invested.

With so many out of reach of buying a home or affording rental costs, job seekers are looking elsewhere. If they do take a job in the capital, they are usually commuting and spending their money in surrounding towns. Companies that would set up business in London must take into consideration the wage levels they must pay to have a work force that will be able to afford housing and living costs. That could be putting many of them off and into setting up shop elsewhere.

The study estimated that had housing and rents stayed in line with inflation over the past decade, as much as £2.7 billion could have been spent toward other purchases and services and that money could have supported almost 11,000 jobs.