Homeowners in the South of England are most at risk of house price falls as the cost of living crisis hammers affordability, experts have warned. 

Properties in the most expensive parts of the country – where prices have become extremely out of kilter with what locals earn – are most exposed to the pressures of rapid inflation, falling real incomes and rising mortgage rates.

The capital lagged behind the rest of the country during the pandemic property boom, but house prices have still climbed 14pc since the end of 2019. This has far outstripped wage growth of 7pc across the same period. And this is where affordability was already most stretched.

The average property in the capital costs 12.3 times local average full-time earnings, according to Capital Economics, a consultancy, as the below chart shows. At its peak in 2007, before the housing market crash, the ratio only ever got as high at 9.6 – almost a third (28pc) lower than today’s figure.

In the South East, the South West and East, the ratios are 10.9, 9.6 and 8.5. These are 18pc, 8pc and 10pc above their pre-market crash peaks respectively.

By contrast, across the UK’s other regions, excluding the South, the average house price to earnings ratio is 6.4. This is 12pc below the pre-financial crisis peak. Home values in these areas therefore have a “buffer zone” against the cost of living crisis.