Your Complete Guide to Property Prices in London: What Can You Afford? - Broke in London

Your Complete Guide to Property Prices in London: What Can You Afford?

Guest post by Niamh O’Reilly

Buying a home in London can feel like an impossible feat. For many people, London house prices are simply too expensive and dreams of getting onto the housing ladder seem far off.

According to Land Registry UK, the average price of property in the UK is £287,506 and in London that price is a staggering £685,200. However, the location and type of property you can purchase for that amount varies widely across London.

If you are considering buying a property in London, rest assured that it is possible! Don’t be scared by the figures. Despite its expensive reputation, London does offer a lot for first-time buyers, buy-to-let investors, second home buyers and more. And there are many affordable and accessible housing options available. You just need to know where to look.

In this article, we will be sharing our complete guide to property prices in London and what you can afford. Let’s get started.

A Bit About London House Prices

Now, we know the figures can be scary but it’s important to understand London’s housing market and the average property prices (as they currently stand).

London is often regarded as one of the most expensive cities in the UK to buy a property. This is because it has so much to offer! From great work opportunities to entertainment, there is nothing London doesn’t do well. So, it’s no surprise its houses are highly sought after.

However, its popularity does come with a downside and that is high property prices. According to The Office of National Statistics, “London’s average house prices remain the most expensive of any region in the UK, with an average price of £534,000 in July 2023 and an annual inflation rate of negative 0.8% in the 12 months to July 2023.”

However, the economy is always changing and the housing market is affected by this. With all the changes we have seen so far in 2023, house prices have actually been declining due to higher inflation and interest rates. Despite this, however, London prices are still too expensive for average-salary-earners.

According to the Financial Times, “Forecasts of falling property values have given some would-be buyers hope that an era in which wages have decoupled from prices might be drawing to a close. But the higher interest rates that are a drag on prices are also pushing up mortgage rates, a scenario that tends to hit first-time- buyers particularly hard. The cold reality is that life has rarely been so hard for a first-time buyer in London as it is today.”

What Can You Afford?

So, if the situation is bleak and house prices are still sky-high, what can you hope to afford? Let’s take a look at the facts.

Whatever stage you are at on your journey towards homeownership, whether you’ve been saving for a mortgage for years, are struggling with bad credit, have a low income, or are looking for help from the bank of mum and dad, it’s helpful to know what you can currently afford so that you can take proactive steps towards your goals.

Here’s how to find out what you can afford.

Mortgage Calculators

One of the easiest ways to estimate the kind of mortgage you could afford is to use a mortgage calculator. Most banks have them and they are easy to fill in. Simply enter your annual salary and answer the questions. You will typically be asked about your income, outgoings on things like loans and overdrafts, and how many people are applying. You shouldn’t be asked to provide any personal details or bank statements.

Mortgage calculators are a great way to see how much money you could borrow, work out your monthly mortgage payments, and learn about interest rates and how changes in these could affect you.

It is worth noting that mortgage calculators can only provide an estimation of how much you can afford based on the information you provide. They are by no means completely accurate and do not offer any sort of guarantee that you can borrow a particular amount.

Speak with a Mortgage Advisor

Once you have filled in a mortgage calculator and worked out how much (roughly) you can borrow, it is helpful to talk with a mortgage advisor.

According to Money Helper, “Getting a mortgage is one of the biggest financial decisions you will make, so it’s important to get it right. A mortgage advisor can search the market on your behalf and recommend the best deal for your circumstances.”

Mortgage advisors are specialists in their field. They know what it takes to secure a mortgage and they’ll be able to answer your questions, provide support, and help you find the right property for your budget. This is especially helpful if you are self-employed as there are often more hurdles for self-employed workers to jump through.

Consider Other Costs

It’s important to remember that when you’re working out what you can afford, there are other costs you need to consider alongside the cost of the mortgage.

For example, in addition to a mortgage your lender will require you to have building insurance for the property. You may also need to pay Stamp Duty Land Tax, depending on the property’s value.

You should also consider the additional costs of moving home, solicitor fees, estate agent fees, surveyor fees, and more. Many people do not realise there are additional costs involved in buying a property and, as such, they do not budget for this.

It is a good idea to understand all the costs involved in getting a mortgage so that you can take these into consideration as they could impact how much you decide to borrow.

Buying in London: Have a Strategy

When buying in London, it is essential that you have a strategy to help your home buying journey go smoothly (or as smoothly as possible). Here are a few ways you can achieve this.

Always Seek Expert Advice

When it comes to buying property, there are people out there who really know their stuff – like solicitors – and seeking their expert advice on things like your buying options, property types, prices, and ideal locations can help you choose the right property for the best price.

Let’s face it, that’s far more appealing than spending your evenings hunched over your phone searching for a property you think is the right one and is maybe priced correctly?

Buying a house is one of the biggest financial decisions (and commitments) you’ll make during your lifetime. So, it’s important not to mess it up. Seek expert advice. It will make a world of difference.

Create a Budget

Let’s face it, if you live in London you’re probably already on a budget. So, we might be preaching to the choir. However, if for some reason you’ve escaped the world of budgeting until now, it’s time to make a plan.

Budgeting is often the first step for aspiring homeowners in their journey towards property ownership. It helps set direction and ensures you are on-track to reach your goals. Budgeting is great for saving and reducing unnecessary spending, but it’s also helpful for working out how much you can borrow and what kind of mortgage you can realistically afford.

Always Consider Location

As we mentioned at the beginning of this article, London property prices are hugely expensive but they vary wildly depending on where in London you’re looking.

Location is everything when it comes to buying the right property for the best price. Your solicitor will discuss locations with you and help you choose an area that offers everything you are looking for (commutable to work, close to amenities, good nurseries/schools, quiet neighbourhood) at more affordable prices.

Be Patient

The key to buying a property in London is patience. While the property market does move quickly and you have to be quick to request viewings and submit your applications, it can be easy to settle.

Our advice is; be patient! You’ve worked so hard to get to this point in your journey. Don’t settle for a sub-par property just because you haven’t found anything better yet. New properties become available all the time in London and there is sure to be one that has everything you are looking for. So, hang on in there. We’re confident you’ll find your dream home soon enough!

In Summary

The bottom line is that it’s expensive to buy in London. However, there are many avenues you can take towards homeownership and we hope this article will help set you up for success.