The myth that any decent house in London costs £1m

Don't believe what they say. People on low incomes can still own a home in London. This week's news that the average London house has broken the £200,000 barrier has revived London's most boring topic of conversation. But it is not true that the poor are no longer welcome. There are no cheap houses in expensive places. But so what?

With the aid of a map and an estate agent, I have made the following calculation. You can walk in a 15-mile arc across the city, roughly from Richmond through Barnes, Chelsea, Kensington, Bayswater and Hampstead to Highgate and pass £1 million houses the whole way. The north-west sector of London must be the largest enclave of property millionaires in Europe, if not the world.

Turn the line east from there, however, and you follow a completely different 15-mile corridor. From Hackney's Green Lanes to Walthamstow, Leytonstone, Forest Gate, Barking and across the river to Lewisham, you will pass homes at £100,000 most of the way. Put an E in any postcode outside the City fringe and the story of the London property market is transformed. This London is a half to a tenth the value of the other. The tale is of two fiercely distinct cities.

Outside the gilded west, prices plummet. I recently noticed a neat cottage with its own garden in Walthamstow for £85,000. Two-bedroom flats in West Ham are plentiful at £100,000. This may not compare with the lush apartments of Westminster's SW1X postcode, where the price average has now broken through the £1 million barrier. But London is not a village of plutocrats. The metropolis embraces Charlton, Woolwich and Plumstead, where the average price of a home is now £90,000.

Nor is that all. As Land Registry prices listed in last Friday's Standard indicate, the east London property market is no longer moribund and thus unattractive to those wanting to climb the "ladder". Prices may have fallen in Mayfair, Marylebone and Bayswater. But over 2001 as a whole, they roared upwards in Newham (26 per cent), Redbridge (25 per cent) and Waltham Forest (24 per cent).

I have yet to read an article about "key workers" and socalled affordable housing that does not bemoan the plight of young teachers, nurses and policemen. They are said to be unable to find anywhere to buy. But the debate ignores the shift in London's social geography. A recent Greater London Assembly report on "key issues for key workers" was obsessed with housing bus drivers in the City of Westminster. This is like trying to house cleaning ladies in Monte Carlo.

The traditional habitats of London's young professionals - Camden Town, Islington and Hammersmith - have gone through the roof, taking the homes once occupied by service workers with them. Young professionals do that to any neighbourhood. The fact is that, according to Christine Whitehead of the LSE, the ratio of house prices to earnings in Greater London as a whole remains at 4:1, roughly what it was when I bought my first flat many years ago. It may be 7:1 in Westminster and Kensington, but move east of the E1 longitude and it falls to 3:1 and even, in Waltham Forest, to 2:1.

At this ratio, housing is affordable. The customary mortgage offer is three to four times earnings. This may be hard for twentysomethingson a starting salary of £18,000-£20,000, but that group has never reckoned on instant home-ownership in London. Today, 60 per cent of London teachers earn more than £22,000 and the average earnings of a Tube driver are now more than £30,000. They can afford to buy, especially with interest rates at rock bottom. A couple with a joint income of £40,000-50,000 are within mortgage reach of a home in most of east London.

London's housing geography has changed but not the breadth of vision of its house- buyers. They see no farther east than two-bedroom flats in Shoreditch and Bermondsey at £200,000-£300,000. This City fringe is merely enjoying the spiralling values that Fulham, Islington and Kennington enjoyed in the 1980s. The trick of the property game is not to read "where it's at" in a gossip column, but where it will be at in five years' time. We should also remember that, as some districts go up, others go down.

Cheap east and south London may be unfashionable, unfamiliar and "not nice". The wrong end of the Central, Victoria and District lines may challenge the street cred of some young Londoners, and alarm their parents, friends and insurance brokers. But crime rates are no higher than in west London. Reported muggings in east London are lower than in Lambeth and Westminster. Transport is far better to the east than in Chelsea, Fulham and Battersea. The idea of a wild night out in Plaistow, Lewisham or Clapton may stretch the social imagination of the young. But that is what Limehouse, Shepherd's Bush and Battersea did for their parents.

London is still a class-bound and hide-bound city. In matters of property purchase, it is a city of snobs. But it is changing. Right-to-buy and immigration are opening up new districts to home-ownership. Just as the West Indians revived Stockwell and North Kensington, so the Vietnamese are transforming Kingsland Road, the Turks Dalston and the Asians Upton Park. Students, the traditional agents of social change, are moving into Bow, Barking, New Cross and Walworth.

London has its rich and poor, and its in-betweens. What is astonishing is not the upward spiral of house prices, which is forever, but the fact that each year another 250,000 young people arrive in the capital eager for action. Somehow they survive. Somehow London gives them a job. Somehow they find a place to live.

The system works. Don't knock it.