Yahoo Finance £500,000 to get your first flat: A quarter of London homes bought by first-time buyers 'worth half a million or more'
A record number of first time buyers must find at least £500,000 to get a foothold on the housing ladder in London, new research reveals today.
The dramatic surge in property values in the capital over the past decade is forcing young Londoners to raise vast sums that would have been unimaginable to their parents, it shows.
So far this year an unprecedented 25.9 per cent of the homes bought by debut buyers in London have been at or above the half a million pound mark, according to analysis of mortgage lending by agents Savills.
This compares with just eight per cent as recently as five years ago and only four per cent in 2007.
Lucian Cook, director of residential research at Savills UK said the figures showed that home owning was becoming “ever more confined to more affluent buyers but even they are struggling to keep pace with house price growth.”
Although the property London has slowed dramatically this year to around two per cent it still leaves prices 61 per cent higher than a decade ago.
Listings on the Rightmove portal show that entire swathes of London are now virtually out of reach of first time buyers with less than £500,000 to spend. In the whole of Camden there are just 54 one bed flats and only 11 two beds listed for less than £500,000.
Across London as a whole 42 per cent of the 9,191 one bed flats on the market are priced at more than £500,000. For two bed flats the figure is 59 per cent of the 15,207 that are for sale.
The £500,000 barrier is significant as properties priced above that level are not eligible for the stamp duty relief announced in last month’s Budget.
With deposits averaging around 25 per cent it also means thousands of Londoners are having to saddle themselves with mortgages of £375,000 or more just as rates are starting to rise.
The data, from trade body Finance UK, also shows that no mortgages at all were advanced to first time buyers for homes in the £125,000 to £175,000 bracket during the third quarter. It was the first time on record that this more affordable segment of the market has dried up altogether.
Sarah Murray, 29, said she had been looking to buy a home for about 18 months with a budget of around £500,000. The media buying executive, who works in the West End, has around £30,000 of savings and her mother is planning to invest around £250,000 of an inheritance in the property.
However, even armed with such an unusally large deposit, Sarah said the process of finding her preferred option of a two bedroom flat has been arduous and frustrating.
She said: ”I rent in Clapham at the moment but I quickly realised I was priced out of that area. I was looking at flats in converted Victorian houses and they were all £600,000 plus and there’s only so much I am prepared to do to compromise my social life by taking on such a big mortgage.
“Now I am looking at new builds that come up in areas like Colliers Wood and Bow. I’ve gradually been working my way around London in a spiral. I’ve also looked at Camberwell which is a bit more affordable because it does not have a Tube station but is still central.
“I did start thinking about buying near the Crossrail station but prices there have already gone up exponentially, people have long since caught on to that. I’m finding people are being forced further and futher out, a lot of my friends have been pushed out out to places like Kent but then you’ve got the cost of commuting.”
But Jonathan Barratt, 23, Private Client Assistant at accountants Blick Rothenberg, said: “The figures outline that the average first-time mortgage is well over £300,000, however this is adequate to buy a three bedroom house in areas within an easy commute of under an hour to London.
“It’s surely time that first time buyers must face up to the reality that being in or close to Zone 1 and 2 is not realistic and they cannot expect government handouts to help them achieve this fairy-tale.”
Polly Neate, chief executive at Shelter, said: “With house prices soaring in recent years, first time buyers in London are having to stretch themselves further and further just to get a foot on the housing ladder.
“We obviously need to build more homes, but even new builds are out of reach for many Londoners. Shelter’s own research shows that across England, eight out of ten working families who are renting and have saved a deposit still can’t afford a new build home in their area.
“To work our way out of this crisis we must embrace a whole new way of housebuilding which drastically brings down the cost of land, only then can we deliver the homes that ordinary working people can actually afford.”
Paula Higgins, chief executive, of the campaign group Homeowners Alliance, said: “While it’s news to no one that house prices in London are astronomical and first timers are struggling, these figures still make for startling reading. With the average salary in inner London around the £30,000 mark it’s clear that a huge number of would be buyers are being priced out of the market.
“The recent cuts to Stamp Duty are very much welcomed - indeed, this is something we have been campaigning for for many years - but buyers will still struggle to raise the deposits required to get on the London property ladder.
"Owning a property remains a top priority for the vast majority of people and the ability to achieve this should not be available only to those who are either extremely wealthy or willing to move away from the capital. "
Deputy Mayor for Housing and Residential Development, James Murray, said: “This latest research underlines the scale of the housing crisis facing Londoners and, in particular, how more and more first-time buyers need a huge deposit or a six-figure income just to get onto the housing ladder.
“Since he took office the Mayor has made it clear he will do everything in his power to increase the delivery of more genuinely affordable homes in the capital.
"He secured a record £3.15 billion from government to build 90,000 new homes, and his new draft London Plan has hugely ambitious targets to boost housing across the city.
“However, fixing this problem will not happen overnight and Sadiq has consistently made the case to government that London must be given the money and powers to build the affordable homes Londoners so urgently need.”
