If you believe all the hype in the media about the difficulty faced by first time homebuyers in London, then you wouldn’t even get through the starting gate.
However, what many people fail to realize is that purchasing property in London when you’re not yet on the housing ladder truly is possible – you just need to be a little flexible. In addition, perhaps you’ll need to widen your scope in order to make the vital first step.
The thing is, the government needs first time buyers in London to keep the housing market healthy. To this end, they are encouraging the house-building firms (such as Taylor Wimpey and Barratt Homes) to actively increase new builds.
However, according to the National House Building Council, in the first half of 2015 these were down by 16% on the previous year.
According to figures released by estate agent Your Move, first time buyers need an average deposit of £70,374 if they hope to buy in London. This makes buying a first home in the UK capital almost unthinkable for most people.
But never fear, because many people on an average wage can and do manage to buy in London. According to payscale.com, the average wage in London can range between £30,000 – £42,000. This number depends on your trade.
Let’s take a look at how the savvy prospective London property owner gets on that first crucial rung of the ladder.
What Options are there for First Time Buyers in London?
Seek out the lower priced areas: This is the option that many first time buyers find works best. London is a big place, and whilst we all might aspire to live in areas such as Clapham, Fulham, Knightbridge or Richmond, to get that first home you’ll need to look at other areas that have yet to become London hotspots. These include places such as:
- Croydon
- Bexley
- Havering
- Barking & Dagenham
- Newham
You can easily check out properties in these areas on websites such as Zoopla and Right Move.
These areas are a little further out from the centre of London, but still offer excellent transport links into town. The Tubes, Overground Trains and London Buses cover these areas, meaning that wherever you work in London, you’re unlikely to have a commute of over 45 minutes to an hour.
Choose a Flat/Apartment Over a House: This is the option that most first time buyers go for. Flats are generally cheaper than houses, and are a great way of owning that first property.
Look at the Less Desirable Areas: Include areas that are close to the more traditional prime London locations. For instance, Seven Sisters offers property prices far lower than that of neighbor, Highbury, and Elephant and Castle is extremely central but far less expensive than sister areas of Bermondsey or London Bridge.
View Properties That Are Less Than Perfect: Such as those that need a refurbishment, decorating, upgrading or even minor structural work.
Having to install a new bathroom and kitchen often offers great value, as it’s highly likely to mean that you get the property for a significantly lower price than if it had already been tidied up. The same applies for minor structural work, or perhaps a roof that’s seen better days.
Team Up
A popular option now for first time buyers is to team up with a friend or friends, or perhaps two couples, in order to get on the property ladder. As long as a reputable solicitor handles all your paperwork correctly, this can be a great way to own your first place.
Shared Ownership
Shared ownership is where you purchase a proportion of the property (between 25-75%) and pay rent on the amount remaining – usually to a housing association or local authority.
You (or you and your partner and/or family) are sole occupiers, and you have the option to purchase further shares in the property over the duration.
There are many shared ownership opportunties in London. For instance, developments in Putney, the Isle of Dogs, Greenwich and Acton are superb areas of London in which to live. The website, Homes and Property, lists many that are currently on offer.
Other New Homes Initiatives
As mentioned earlier, the government is actively encouraging folk to get on the house-buying ladder. Because of this, there are many opportunities and programs available to help. These include:
Help to Buy: This program is open to both first time buyers and home movers on new build homes with a purchase price of up to £600,000. You’ll need to have a minimum of a 5% deposit, and the program will provide you with an equity loan of up to 20% of the purchase price.
You then need to get a mortgage to cover the rest (up to 75%). You will not be charged any fees on the equity loan for the first 5 years, and then in year 6 you’ll pay 1.75% (this then increases each following year).
When you sell your home (or after 25 years), you must pay back the loan. This will depend on the market value of the property at that time, but will always be the percentage you borrowed.
So, if you borrowed 20% to buy the property, you’ll pay back 20% of that price back to the government when you sell.
Help to Buy ISA: This is a government program whereby you save money in an ISA, and then they will add 25% to your savings (up to a maximum of $3,000). This is in order to help you save up for your property deposit. It can be used to buy any house worth up to £450,000 in London.
As you can see, it might take a little extra effort to get on the property ladder in London, and you’ll likely have to combine more than one of the above methods to do so.
But once you’re on there, you’re a homeowner in one of the most sought after cities in the world. As anyone who’s done it before you will say, it really is worth the extra effort that it takes. Good luck!