Soaring London house prices have given it the dubious title of the world’s most expensive city to live in, according to a new report by upmarket estate agents Savills.

Recent government figures show that the average price of a home in the UK capital is more than £500,000, while the high cost of every day essentials such as transport and entertainment cemented London at the top of the list.

The city beat other inflationary hotspots including Hong Kong, which held the title for five consecutive years, New York and Tokyo. The Savills index combined the average cost of renting, living and office space for one employee for a year.

Explaining the findings, the report stated: “A combination of falling residential rents and, most importantly, a weakening currency, has boosted Hong Kong’s competitiveness, with total real estate costs down -5.6 per cent in the first six months of this year, an annualised rate of -11.2 per cent in dollar terms.

“By contrast, London real estate costs grew in US dollar terms by an annualised rate of 10.6 per cent in the first six months of the year so London has now become the most expensive world city in which to accommodate staff, at $121,000 per year. This was largely due to the UK pound’s recent appreciation against the US dollar.”

The Office of National Statistics says London house prices rocketed 11.7 per cent in the 12 months to July.