Half of young workers are priced out of home ownership because the house price boom has pushed even modest properties out of their reach in hotspots in London and the South West of England.

Even in cheaper areas, such as Yorkshire, the North and the Midlands where prices have stalled, a starter home with two or three bedrooms is commonly out of reach, according to a new Hometrack affordability study, which finds a quarter of new buyers in the UK have been priced out.

The South West has the greatest proportion of young households priced out of the market (34 per cent) followed by London (31.5 per cent) and the South East (30.2 per cent).

Young buyers in Kensington must now spend 9.2 times their annual income to buy a two or three-bedroom home, while those in Camden must pay 7.1 times, and those in North Cornwall, 6.9. The UK average is 4.3.

The situation is so acute that in the local government areas of Kerrier, Penwith and Carrick, in the South West, and South Buckinghamshire in the South East, more than 50 per cent of young workers – those too rich for housing benefit, but too poor to buy – cannot afford a home.

Scotland, despite booming prices, is the most affordable area, with 15.8 per cent of young working households priced out of the market. However, the growing number of forced tenants are enjoying a bonanza of cheap rents, according to the Hometrack figures. The cost of renting a starter home is 70 per cent of buying it on a 100 per cent 25-year repayment mortgage.

Nowhere in the UK was it cheaper to buy than rent.

Steve Wilcox of York University, the author of the report, said: “Not too long ago there was little difference between the costs of buying and renting, but while house prices tripled in the years since 1994, private sector rents only increased in line with earnings, and the costs of renting have fallen relative to the costs of buying.”

Predictions of a stagnant property market next year offer little hope to frustrated buyers. Even if house values were to fall 10 per cent, one in five workers would still be unable to buy, the Hometrack study shows.

Government targets for three million new homes, most of them affordable, to be built by 2020 will do little to help. Professor Wilcox said that it would take until 2014 before the number of new homes caught up with backlog of new households that had formed since the 1980s.

Richard Donnell, director of research at Hometrack, said that rents had been depressed by the growing buy-to-let market. However, investor interest in the smaller, cheaper homes that appeal to first-time buyers means that these are now more expensive relative to the larger homes that appeal to those trading up.

David Salusbury, the National Landlords Association chairman, said renting was a “good-value alternative” for those who are unable to afford to buy.

Hometrack’s report focuses on those aged 20 to 39, who work but earn too much for housing benefit. Hometrack defines those priced out of the market as those unable to afford mortgages on the cheapest 10 per cent of two or three-bedroom homes, even with houshold income that includes two wages.