Oxstones Investment Club™As London house price growth eases – in the luxury market in the West of the capital at least – the prospect of first-time buyers being able to grab onto that first rung of the ladder in the city remains as elusive as ever.
Yes, the latest house prices indexes have noted that the average property price in some regions is some 10% or more lower than it was 12 months ago. However, even in the most affordable areas of Greater London, property values are still way out of reach for those trying to make a purchase with their savings and earnings alone.
“First-time buyers have it tough across the whole of the UK, but for those hoping to buy a home in London, they’ve got a lot of saving and searching to do in order to realise their hopes,” said Hammersmith and Fulham based estate agent, Lawsons and Daughters.
Data from high street mortgage lender Nationwide has shown that affordability as calculated by a house prices to earnings ratio has risen to 10.4 in the second quarter of 2016. That’s the highest level since calculations for this measure began in 1983 and puts the average price for property at more than 10 times average earnings for the region.
Meanwhile, for the UK as a whole, the ratio rose to an almost 10 year-high of 5.3. The lowest ratios are in Scotland and Northern England of between 3.3 to 3.8.
“These figures lay bare just how hard it is for first-timers to get onto the property ladder in London UK in 2016,” said Battersea estate agent, Eden Harper. ”It doesn’t seem to matter that more property is becoming available for sale in some areas, demand is such that first-time buyers who don’t move decisively will miss out on the most ‘affordable’ homes.”
But that’s not the only problem facing the London property market. House builder Berkeley has warned that unless some significant changes are made, the capital risks missing its 2020 new homes target, by quite a margin. Specifically, the Group said rising costs could weigh on builders’ ability to deliver the much needed homes in the capital.
“What is increasingly clear is that Government policy, which has been helpful outside London, has had a negative effect on the capital,” Berkeley said in a recent trading statement. “Transaction taxes are now too high and this is restricting both mobility in the second hand market and the pace of supply and delivery of new homes in London and the South East.”
The strong statement concluded with the view that “London will fall well short of its targets for new homes. This is not just a problem for business and ordinary people in the capital but for the country as a whole. London is the engine of our national economy and the principal driver of fiscal revenues.”
Without a properly considered and workable home-building plan for London and the UK as a whole, there is a real danger that home-ownership will become increasingly less attainable for anyone other than the rich or in the form of a legacy passed down through families.
“London is a vibrant city which should be reflected by the people who live there,” said Denhan Guaranteed Rent. “Renting is a popular route into London living, but many Britons still clamour for their own piece of the city. More hard work needs to be done to ensure home-ownership doesn’t become a distant dream for hard-working Londoners.”
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