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!!

[Just5minswithDacre]

Yes, so many people have 'made ' half a million or more just by living in their houses over the past few years.

It's hyperinflation really.

[whois]

5 times combined salary for a mortgage, really?

Yes really. Why so shocked?

Once you've got a decent LTV % < 70% and a higher salary you're a pretty safe bet to lend to.

[TinySalmon]

A lot of this is thanks to skyrocketing house prices over the last 5-6 years, leaving those who have been or are on the property ladder to now jump up a rung or two on the price scale.

For young people in London it's seen as a pipe dream, unless your parents can help you out.

Or in DP's Ex wife's case, divorce him, take him to the cleaners, and get to live in a 5 bedroom mortgage free home worth over £1.5mil

[pinkcardi]

City salary plus some luck. No parental help in our case. £100k deposit on a £475 purchase in 2007, then sold for £550 in 2012, bought at £975 (450k deposit from flat sale and savings). House now worth £1.5 and will cash this in for country move in a few years. So, in our case, lots of luck with timing and some saving but no parental help.

[sparechange]

A 5x mortgage isn't any issue when you are both on stable six figure salaries because it still leaves £5k+ a month after all bills are paid
Even if one person was to lose their job, it would more than likely be a job with a payout, or comes with critical illness cover, and they'll be a deferred bonus that can be cashed out as a buffer.
Unless you've been marched out the door for gross misconduct, of course...!

[NotCitrus]

If you don't have a chunky deposit from your family, then alternatives are to buy somewhere tiny with a plan to rent it out when you could afford somewhere bigger, or get a mortgage on a larger house and share it with others, either joint mortgage or renting rooms to lodgers. I know a few people raising kids as effectively an extended family because two families are sharing a house.

[Hassled]

I think with most people in middle age or onwards it has to be because they bought early and wisely. I sold a flat in East Dulwich in the late 80s for something like £80K - flats on that street now are worth £600K. So the people who hung onto their properties - they're sorted.

But younger people - I have no idea. I have a DS who is wanting to buy in London - we're in no position to help him and I just can't see how he'll ever manage it.

[Sleepybeanbump]

DH and I have combined income of about 90k.

We bought a wreck at the bottom of the last crash in an unfashionable area for 270 on combined salary then of about 60. 50k savings and 50k family help. Lived in said dump and spent remaining savings and every bit of spare cash for years doing it up. Property market went up and up, area became much more fashionable so price rises were above London average. Sold for 450. Moved 3 years ago, borrowed a another 100k bit more, spent more on more renovations and now have house worth about 770k of which we own about 2/3 outright.

We're paupers compared with most of our neighbours who have far higher salaries which are pretty common in London. The mortgages+new cars+holidays etc that most people around us afford often prompt DH and I to have 'how the hell do they....?' conversations.

[RiverTam]

2 previous properties bought in cheaper places (but with help from my dad for the first deposit). Then inheritance.

I work in a not-particularly well-paid industry in London, the majority of people who own their own homes have had parental help or inheritance.

[Coughingchildren5]

Lived at home and saved up.
2003 bought a 2 bed flat for 120k with a 5k deposit zone 5.
2005 sold up for 137k and bought house for 235k in zone 4 an area due lots of investment.
Worked very hard, lived simply, had kids, got promotions, overpaid on mortgage, no credit debt.
2015 sold for 500k and equity meant we had a 400k deposit.
Combined income means we have borrowing power of 500k so if we chose to we could afford an 800k house but instead we bought in a cheaper area, work part time and will be mortgage free in 10 years.
We are in our early 30s.

London has lots of affordable areas but people insist on trying to buy in more expensive areas and then complain about it.

Everyone I know who has bought has either done the simple life thing to save properly (I'm talking about no mobile contracts, no TV, no going out, no package holidays, no shopping splurges, basic phone, two pairs of shoes, shop in aldi, night school for promotion options etc) or had a hand out from parents. Those that have done neither are renting.

Property doubled in value in London over the last decade so people who move out one or two zones have a lot of equity but their mortgage probably isn't much bigger than people living elsewhere in the country.

[suit2845321oie]

Bought at £65k in the late 90's and sold at £140k in 2001. DH bought at £120k and sold at £150k. Sold both properties and bought at £330k In 2001. Sold at £460k in 2006. Bought a doer upper at £445k and extended it buy extending mortgage to £300k. House now worth about £900k. Mortgage down to £250k and about to remortgage for £75k to £325k to extend again. House will be worth about £1.2M after the work. Will leave us with equity of approx £850-900k. We're lucky to have never taken mortgage over £325k but have been offered up to £800k on income circa £200-250k. When we first bought were each on £35k and could never have what we have now on that.

[alazuli]

'Those that have done neither are renting.' Very true, Coughingchildren5. I have friends in their 30s with hardly any savings at all.

[ancientwonder]

DH and I bought our flat at £600k four years ago. It's worth about £800k now. He is on a good six figure salary, although not in the City. But we had no family help at all, we paid a £250k deposit from savings amassed from earnings, over a decade since we graduated (we lived in shared flats until we bought our place, rather than paying more expensive rent on a self contained flat).

Our flat is in a fairly expensive area (zone 1) but it's just a 2 bed with no garden. We both work in central London and prefer to have a short and easy commute rather than buy somewhere bigger but be further out, and we don't have plans to move.

[bittapitta]

Interesting thread. Difficulty now for (potential) first time buyers is that it's harder than ever to save when rents in the London suburbs for a flat/house big enough for a family are £1600-2000pcm+

[Coughingchildren5]

Yes it is difficult to save but that's because people are trying to buy after they have other responsibilities. If you try to get on the housing ladder after you have children of course it will be more difficult. You have less spare money to save and need to buy more space and your priority is enjoying your children growing up, not skimping on fresh fruit and veg to keep the food bill down. Also you have childcare issues, school issues, less borrowing power...

The conventional younger couple with a fairly typical combined income of 80k should have no difficulty as first time buyers in London.

A family of four who suddenly decide they want to buy a 3 bed house near a good school will have lots of difficulty.

[Whatthefoxgoingon]

For us: large income, living in crappy areas at the start, trading up the ladder, very large mortgage at start, buying many years ago and before kids. All of these factors combined mean we now live in an expensive (several million pound) house. Wouldn't have happened if just one of those factors hadn't fallen into place. So a shit load of luck was involved. Doubt I'd be able to get as far if I'd started on the property ladder today.

[SuzyLucy]

A 500k mortgage in our case! Our house is worth about 1 million. Crazy for a 3 bed terrace.

[indieblack]

I would love to know where the affordable places are now. Like a PP we bought one of the last 3 beds houses in S London for >250k 5yrs ago and next door just sold for 560k We bought next to a more fashionable area and prices have rocketed.

We rented cheap and grim places for 4 years to save but the hovels that we rented for 650PM are now hovels going for £1000PM.

I was sad about being priced out of the area I grew up in in London (though I love where we live now) but had I been 5 years younger I'm not sure I could afford any kind of family home in London now

[Newname12]

No family help or inheritance here.

I bought a small shitty flat in another city when i was 21, with my student loans as deposit, against all my friends advice- why tie yourself down, what about if you want to go travelling, move to another city.....

Made enough money for a deposit on a london flat, which in turn gave me enough for a house deposit.

Many of my friends who told me not to buy my first flat are still trying to get on the ladder. Funnily enough they seem to have forgotten how stupid they thought i was being buying so young and are now banging on about how "lucky" i was . Their problem is they now want to go straight to a three bed with garden, rather than start with a flat like i did.

[Nickname1980]

We live in London and have a budget of a bit more than £800k - ONLY because we've owned property in London for more than 10 years (each). My first flat was £135k (in London). I put down all my life savings as a deposit - less than £10k. Prices then went berserk, my husband and I sort of pooled our flat budget (two sales), borrowed a bit more and we just rode the wave. The money isn't quite real to me!

Neither of us have had any family help. We don't have rich parents. We just got lucky that we bought when we did. Though - actually - we can't afford a family house in our current neighbourhood so we have to keep reminding ourselves that we were lucky!

There's no way we'd have a budget like that if we hadn't bought in London before the prices rose so gigantically. Especially as I work in a notoriously poorly paid industry (creative stuff) and only part time, too.

[Maybebabybee]

I always wonder this. DH and I have a combined income of 110k and we could only afford a two bed flat.

I assume most with a big budget aren't first time buyers.

[Betty4321]

I know prices have gone crazy since 2010, doubling or more. Lots of it is due to foreign buyers and money laundering pushing prices way up and rippling out of the center of London. However these prices in central London have been falling now for many months in central London and also rippling out. Brexit has just increased this. It looks like these bubble prices have really popped. I wonder how much they will fall?

[Bitofeverything]

I've noticed a really abrupt line in London - in that if people are over 40, they could save a deposit themselves and buy. If they're over 30 and had a bit of parental help, they've managed it. Under 30, it's not possible without huge help or crazy salary. Depressing.

[babydad]

We brought right at the top of the crest in March 2008 in SW London a one bedroom flat for £200k, lived there for 4 years and had the issues of negative equity and when we had our DS, we had to rent it out and rent elsewhere. Luckily, the market in the area went a bit mental and last year we sold for £72k profit. All that went straight into the deposit into a 4 bed house in SE London that even before we completed, went up £80k and has since come up another £100k in a year. Mortgage is high to be honest at £400k, and we are looking to extend so will take more equity out next year.
A bit of me wishes I had brought as soon as I moved to London in 2004, could have made alot more, but as others have said it, all about timing.