How do people afford to live in London?

[Rupster]

From time to time, discussions appear on here about buying property in London.

Often people will say they have a budget of, say, 800K.

I'm just curious as to how people can afford such an expensive property!

If the median UK salary is around 28K, two people earning this borrowing 3.5 time joint salary could get a mortgage for only 196K!

I appreciate London salaries are higher and people probably have some equity in their existing homes, but I still don't see how people can afford so much!!

[JE678]

Most people I know who can afford decent sized family homes in London have inherited or had help from family if they have bought in the last 5 years or so. I have a few friends who gave bought from earnings alone but they generally have City salaries.

[searchingfortheanswer]

I live in London.

City salaries.

[whois]

Um, obviosuly you have a much better paying job than the 'national average' if you have an £800k budget.

Two early thirties workers on £100k each is pretty typical. You can borrow 5x easily.

And you've both been saving so have £100k+ in savings.

And two city workers likly have well off parents who can gift a bit.

[cestlavielife]

equity has increased massively if you bought in london just five or six or seven years ago - so a house bought for 500K literally might have doubled to 1 million (give or take) so potentially someone has got 300 or 400k equity or even more.

[cestlavielife]

example - bought for 340k in 2009, on sale for 750 so expecting at least 410k to take away
www.rightmove.co.uk/property-for-sale/property-59751803.html

[Sandbagsandgladrags]

Virtually everybody I know who has bought in London in recent years has had family help. Also I think there are just lots more youngish people in London who earn in the region of £60 to 100k for mid-level professional jobs. And then a fair few others who earn beyond that in the top law firms and investment houses etc.

If you bought a small house in 2010 for £280k with a 20% deposit, you might now be selling it for £500k. The next rung on the ladder might well be £7/800k. So you have your equity plus accumulated pay rises. You might have gone from a joint income over that period of £80k to £150k. You take a gamble that you'll be able to maintain or increase your earnings, plus you might have a bit more inheritance coming your way at some point.

That's how people I know seem to do it, anyway. Agree it's a bit mad though.

[NoPlanYet]

Many of my friends and I have a budget of around 700k on not too obscene salaries and no parental help.

For us it generally goes :

Bought for 250 4-5 yrs ago (50k deposit plus two salaries of 35k+ each)

Selling for 450 therefore getting about 200k equity

Combined salary of 100k plus ( good salaries but hardly huge in london) means mortgage of 5 times this is achievable so 500k+, add it to the equity and there is a 700k+ budget

[thatsn0tmyname]

I got on the ladder back in 2000 and have slowly moved up from studio, to 2 bed flat to 3 bed semi. We couldn't afford to buy above £500,000 though.

[Cacofonix]

It's a bit much suggesting most people get help or inheritance. DH and I started off buying a place we here we didn't want to live - it's all we could afford. Bought for 150 sold for 250 - then moved to an area two areas away from where we wanted to live - bought for 380 sold for 700 nearly 7 years later (huge uplift in this area recently). Now live in an area we like - house over £1 million. Most of this is achieved via increasing property prices. And a way above average wage. That's how people have high budgets but in reality it's all meaningless as you can't realise that money unless you move away from London.

[idontlikealdi]

Agree with Noplan - it's not necessarily family help but the London situation is wildly different to most of the country - although not all.

[Sandbagsandgladrags]

Don't think anybody on the thread has said that's how most people do it - but it's how most people I know have done it. Also it's got harder in the last few years to get on the first rung of the ladder, because sub-£250k flats are much thinner on the ground.

[SissySpacekAteMyHamster]

We've got a massive mortgage!

[Mummyme87]

We are buying in south London for £450k. I earn £38k and OH £56k.. We are lucky that OH bought a flat 6years ago that has given us a whacking deposit.

[Stinkingbishopess]

Both me and DH bought "cheap" flats a few years ago in inner London. I had a small amount of family help, he had a key worker loan. Prices rocketed. Cashed those in and bought a big house slightly further out, but still London. We earn slightly above average salaries for where we are, but we're not loaded. Most of the neighbours are much older than us, mostly retired.

[bibbitybobbityyhat]

You must understand that most people who are buying £800,000 properties have years of property ownership behind them?

It is very rare to start off at that sort of level.

[LBOCS2]

We bought (what may well have been) the last house for under £200k in greater London, 4 years ago. And then DM died and left DSIS and me a large 4 bed in south London. And we earn reasonable money between us (c. £100k, but 2 sets of childcare to pay too...).

[EssentialHummus]

I bought 3 years ago for £180,000 (no family help, just savings from two jobs and a 10% mortgage). Property prices have skyrocketed, so the flat (based on what the neighbours sold for) is now worth north of £300,000. DP has similar. If we sell, there's a lot of equity there. DP's a software developer, I am/was a lawyer, so high salaries there.

When we eventually find a family home, it'll be in the £750k - £800k region.

What's more difficult (and interesting) is how lower earners cope (or don't, as the case may be). "Rich fuckers can afford property" isn't exactly big news, but when I think of the sums involved I can't imagine that a teacher or a nurse (to use the stereotypes) would be able to cope.

[whois]

I can't imagine that a teacher or a nurse (to use the stereotypes) would be able to cope

I would never be a teacher or nurse in London. Just don't see the point.

Those professions get you a really nice standard of living anywhere else in the country.

[whatsthatcomingoverthehill]

5 times combined salary for a mortgage, really?

[Boosiehs]

House price increases leading to big deposit. bought for 325 9 years ago in Islington, sold for 525 a few years ago. Now have a 5 bed house in Zone 3 on crossrail (15 mins to west end). also city (Mayfair) salary helps altho LTV is about 45% at the moment.

No parental help. Just saving and working bloody hard/long hours.

[alazuli]

I'm looking for my first flat in London on a v measly budget and have also wondered this about other MN users. I've had no help from parents, just saved like a crazy person for 9 years.

It seems like a lot of you have built up equity in quite a short amount of time in London. I just wonder if this will still be true of people who buy now with all the uncertainty over the EU in the next few years. :(

[Mummyme87]

I'm a midwife in London, salary about £38k at the moment.. I earn a lot more than others I know, however we couldn't afford an £800k house

[NoPlanYet]

I was surprised to be offered 500k mortgage but I've been offered it by a number of different providers and my broker told me it is standard for purchases over 500k as once your salary gets higher you need proprtionally less to live on.

The really odd thing, and I think is wrong although I am about to benefit from it, is that actually we are keeping our 450k flat, remortgaging it for 280k (140 will pay off current mortgage and 140 will be left over) and using the equity as a deposit for our (actually 640k) onward purchase. So our total debt will be nearing 800k on a joint salary of about 115. But the flat rent will more than cover the mortgage payments (rent 1500, mortgage about 500pcm) so it all adds up. This is 'how it's done' apparently.

Disclaimer : I didn't want to do this but we're doing it for 2 yes as an emergency measure after we lost our 3rd lot of buyers too late in the day to find new ones and we were at risk of losing our 3rd onward purchase. Feel free to search my username and enjoy my endless moaning about it as it unfolded)

[conkerpods]

I bought a flat (on my own) in 2002 for £112,000. I put down 10% deposit which my Dad gave to me as his Dad had recently died. They were giving money away back then so it was easy to do a self cert mortgage (I was self employed).
Sold it two years later for 168,000 and bought our current home for £218,000 (3 bed terrace). Bought with my ex so it was both our salaries. It's now worth £600,000,absurd!
We now have two kids and it would be useful to have another bedroom but no way could we get a bigger house as the prices are too high.
Unfortunately I have to live in London to work,I also work unsociable hours so wouldn't want to live out of town. It would be great to move back to my hometown and be mortgage free with money in the bank but I can't work there. Luckily I'm pretty happy here (SE London).

[conkerpods]

A friend of mine recently sold a two bed house in East Dulwich....it was marketed as a great 'starter home' and on for 800k