How do you people afford to buy property in London?

[England101]

Im in my mid 30s and looking to buy a property, ideally in the outskirts on london. I have a deposit of 60K but (according to online calculators) can only borrow 155k. Ive began looking on the property for londoners website they have a shared ownership house on there for 725k!! full price and they asking for 290k for 40%!! Even with shared ownership how are normal people meant to buy property in/around london.

@Paulina23

The concept of ladder is mostly a thing of the past now as it only works when prices are increasing, London market has been flat for the last 5 years (last 12 months might be the exception for houses with garden). To paraphrase a famous economist in 1929, house prices have reached what looks like a permanently high plateau.

I'm not sure I agree with this. Ridiculous house price inflation is preventing people from climbing the ladder! Before, paying down equity and getting payrises helped you climb the ladder, not house price inflation! And house prices are increasing everywhere else anyway

The concept of ladder is mostly a thing of the past now as it only works when prices are increasing,

No. Your 500k flat goes up by 20% so it's 600k, the 700k house is now 840k so now you need to find 240k to move up as opposed to 200k plus additional stamp duty

@gibletjane

The concept of ladder is mostly a thing of the past now as it only works when prices are increasing,

No. Your 500k flat goes up by 20% so it's 600k, the 700k house is now 840k so now you need to find 240k to move up as opposed to 200k plus additional stamp duty

Yeah so you now have to find an additional £40k than if house prices hadn't increased, plus the extra stamp duty. You'd be better off if house prices hadn't increased

I bought in my 20s what was then a pretty shit area
Borrowed £10k off my parents, which they made me pay back monthly including interest but it was enough to add to some savings and get myself a 95% mortgage for a 2 bed place
Rented the spare room out and could just about pay bills but it wasn’t a wild few years

I was very envious of my friends and colleagues who were living in fun flatshares in Fulham and Clapham, but I chipped away at the mortgage and the flat went up
When I remortgaged after 2 years, I paid them back and was also able to get a better LTV that brought the payments down a lot but those first 2 years were a pinch

Then met ExH, who also had a 2 bed flat so we lived in his for a bit and rented mine out. Then rented both out, remortgaged both and bought a 4 bed house in an up and coming area
It doubled in value in 5 years from £500k to just under a million, so when we split up, I had a £250k lump sum from the sale
Went back to my flat for a bit, met currentDH who also had a flat with a bit of equity in it, sold both flats, bought a 4 bed house in a v nice area

Sold that after 4 years (to FTBs! They do go straight to houses) and bought a 5bed in a v nice part of zone2
Our mortgage is absolutely eye watering but will be paid off in 10 years

But it’s taken 15 years to get me from first purchase to nice house, much of it spent living in grotty places!
Those friends who spent their 20s in the lovely flatshares are now tearing their hair out with kids in flats so as dull as it was at the time, I made the right decision

We bought our house in 2008 with 2 decent (but not megabucks) salaries. And even then the only way we could afford a 3 bed house was to get a complete doer upper in zone 6. We thought it was expensive then but it's absolutely skyrocketed since. If we were first time buyers now we wouldn't be able to afford this house in a million years. I really feel for people trying to get on the ladder now.

In your example, the owner of the flat has now 100k of additional equity, he will have to borrow a larger amount to get to the next house than in slow market which was made possible by ever decreasing interest rate. Now the FTB will have to pay 100k for that flat hence somehow gather a much larger deposit and a higher mortgage to get in the pyramid scheme.

Ladder only works because of the free lunch of equity building in a rising market.

I paid 23k for 4 bed house in walthamstow in late 80's....wasnt desirable then...i didnt go out for 2 years, no holidays, spent about £1 a day on lunch for work etc etc saved the deposit, no help from rich grandparents at all who owned 12 rentals at the time...!!...since all sold off for retirement etc....interest rate was 14% at the time....slowly did it all up...now worth over 1m i guess...but very happy here with lovely neighbours etc.

@Paulina23

In your example, the owner of the flat has now 100k of additional equity, he will have to borrow a larger amount to get to the next house than in slow market which was made possible by ever decreasing interest rate. Now the FTB will have to pay 100k for that flat hence somehow gather a much larger deposit and a higher mortgage to get in the pyramid scheme.

Ladder only works because of the free lunch of equity building in a rising market.

Who are you talking to?

I paid 23k for 4 bed house in walthamstow in late 80's.

This is what's changed

Depending on your work situation (e.g. working from home or hybrid) you could move out of London (e.g. essex -basildon way) and may be able to get a 3 bed and rent the other 2 rooms out (enough to cover your mortgage or large portion of it) that way your expenses are bills and you continue saving but you know the mortgage is covered and wait for a price increase and hopefully the money saved + value increase + initial deposit could give you a bigger deposit for a london property. Equally you could buy a 2 bed flat in london and do the same.

shesellsseacats

That 4 bed house sold for £240,000 Guide Price = £125,000+
Still a bargain! But yes - leasehold, wonder how many yers left but no doubt that has been factored into the price.

London went nuts in the 90s. I managed to buy my first two bedroom flat, no deposit required and i was a single parent too. It tripled in price within 4yrs. My OH did the same before we met and still has his flat in zone 2 that he rents out now. We saved for a deposit for over ten years and rented houses as we had kids. We were lucky and managed to buy in a sought after area in london when there was the financial crash in 2008/2009. We got 200k off the asking price. My OH would say it wasnt luck as he had been waiting and watching the market for years whilst saving.

My adult son has a friend who bought in zone 1 at age 22..he was working in one of the lead banks and making a fortune. Where I live there are a few young couples moving in and they are lawyers and politicians. I feel like a fraud

My suggestion is that you look at areas that havent shot up yet in price yet, see what local plans for development and go for the one where their are plans.

I just don't know how people do it these days. I bought almost 20 years ago, in a shabby area, and a modest property. I wouldn't be able to buy it now.

Most of my friends have bought as couples, and bought in places like Chingford, Enfield, or even outside London in Kent or Essex.

If I were a single first time buyer I think I would choose another city tbh. I have single friends who have bought very nice flats or houses in Edinburgh, Manchester and York within your budget.

I bought a 2 bed flat about 5 or 6 years ago in a not-as-nice part of a trendy bit of east London for less than £200k, with a 5% deposit I’d scraped together as a freelance creative. It had a short lease and I had to save to extend it a couple of years later, but that, plus improvements in transport nearby meant it went up in value by nearly 50%. It wasn’t as fun to live in as my previous rented flat in a cooler area, but worth it.

@FatAnkles

Move to Medway Towns, it's cheaper.

thanks for the suggestion, I've started looking around this area.

@SW1amp

I bought in my 20s what was then a pretty shit area Borrowed £10k off my parents, which they made me pay back monthly including interest but it was enough to add to some savings and get myself a 95% mortgage for a 2 bed place Rented the spare room out and could just about pay bills but it wasn’t a wild few years

I was very envious of my friends and colleagues who were living in fun flatshares in Fulham and Clapham, but I chipped away at the mortgage and the flat went up
When I remortgaged after 2 years, I paid them back and was also able to get a better LTV that brought the payments down a lot but those first 2 years were a pinch

Then met ExH, who also had a 2 bed flat so we lived in his for a bit and rented mine out. Then rented both out, remortgaged both and bought a 4 bed house in an up and coming area
It doubled in value in 5 years from £500k to just under a million, so when we split up, I had a £250k lump sum from the sale
Went back to my flat for a bit, met currentDH who also had a flat with a bit of equity in it, sold both flats, bought a 4 bed house in a v nice area

Sold that after 4 years (to FTBs! They do go straight to houses) and bought a 5bed in a v nice part of zone2
Our mortgage is absolutely eye watering but will be paid off in 10 years

But it’s taken 15 years to get me from first purchase to nice house, much of it spent living in grotty places!
Those friends who spent their 20s in the lovely flatshares are now tearing their hair out with kids in flats so as dull as it was at the time, I made the right decision

I wish i had the money in my 20s but i didn't really get a good job until more recently. i worry that i may have missed the boat!!

[quote gibletjane]@SD25 I would skip the flat stage if buying now. We are skipping the medium size house & buying bigger further out. [/quote]
that was my plan but im priced out ATM

Edinburgh, Manchester, York... Sorry but they are nothing like London in all sorts of ways!

It’s tough OP, especially if you’re single. At the grand age of 43, with a fairly senior public sector job, I have only just managed to get enough together to buy 25% of a two bed shared ownership place in zone 3! It’s insane how hard it is unless you are a) in a couple both earning decent money or b) could rely on the bank of mum and dad for a hefty deposit .

Edinburgh, Manchester, York... Sorry but they are nothing like London in all sorts of ways!

Oh I know, but I could make a happy life in any of them. I think there would be a point where having a secure home and good quality of life would outweigh the relative benefits of London over those cities.

Yes, absolutely

Move further out and / or partner up. I had to do both to afford a 2 bed flat with garden. We also made use of the help to buy ISA / lifetime ISA, but that limited us to a property under 450k. Which sadly doesn't go far in London

It's ridiculous because both me and my partner do not earn a bad combined wage, it just seems so stacked against all but the mega earners, those with inheritance and those who got lucky previously in the house market.

Our plan is hopefully to eventually sell the London flat when we are ready to move on, and get a humongous house somewhere outside of London for the same price in that way it is an investment I suppose, unless all the London prices plummet

What are you looking for OP? What are your essentials for the property? How many bedrooms? Do you need to commute to the centre of London/be able to travel somewhere easily? Are you willing to do up a place or prefer to move into a finished place?

I bought a 1 bed flat in a grotty area of SE London in 1999.

Met a bloke who was a builder, bought a 3 bed maisonette which needed loads of work. Builder bloke did a fair bit.. broke up. Met my now OH who moved down from the Midlands. We did a load of work. Sold nicely renovated maisonette for silly amount.

Area started to improve.

Had kids, moved to a big 4 bed house in 2019 that needed ( and is ongoing) a ton of work which we are mostly doing ourselves.

Area is 'gentrified' by now so house worth a fair bit more than we bought it for.

Life for us revolves around our project house but it is lovely and worth the effort. Couldn't have got here without previous grotty flats though.