Are you considering discovering an affordable and accessible house in London? If that is the case, we have got you covered like a blanket in this blog because purchasing a house, especially in London, has become challenging for the first-time home buyers, second home buyers, buy-to-let investors, foreigners or retirees.
Although the house prices in London have been falling, the houses in London are still out of the reach of many people who are earning an average income. According to the latest statistics of Land Registry UK, the average price of a house is £287,506 in the United Kingdom.
Several factors impact the decision of buying a home in London. For example, location, type, price, mortgage and financial budget. Many people feel stuck while exploring all of these options. So, they are prone to make costly choices if they fail to get complete guidance on these significant factors.
In this blog, we will provide you with the necessary information required for buying a home in London and chart a course to explore the best possible options for this. So, let’s bring up all the challenges and discuss them in detail!
Table of Contents
House Prices in London
On the other hand, the house prices in London are higher than those in the United Kingdom, according to the Land Registry. The average house price in London was reported at £532,210 in February 2023. The following graph shares information how the prices have been dropping due to higher inflation and higher interest rates in London. Nevertheless, the house prices in London are so expensive that one has to pay through the nose or it will break the bank to pay such high prices in times of higher cost of living.
The above figure shows that the house prices stood at £1,400,000 in West London on January 23. The house prices have discouraged many home buyers from buying a home to fulfil their dream of living in their own home.
The prices depend upon the size, layout and location of the house. If you want to buy a new-build home in London, the prices are so high that it would be challenging to manage your finances, especially if you’re reaching your retirement age soon.
Alternatively, the houses in the suburbs or away from the centre of London will bring you decent prices for your dream home. Similarly, the design of a house considerably affects the prices. For example, the average selling of terraces (£904,468), Semi-detached (£1,568,548) and detached (£2,918,331) was reported by the land registry for West London, according to data published in February 2023.
The good news is the UK government offers a number of options for the people who find house prices challenging and unaffordable due to the low savings and income level.
Government Purchase Schemes for Affordable Home Buying
Previously, there were two active purchase schemes available to the new-build home buyers.
- Help to Buy: Equity Loans
The help to buy equity Loan has been terminated and the new home buyers cannot avail of this scheme. So, it’s essential to know that if the previous home buyers have already applied and the application is in process, they will get an equity loan from the UK Government.
This scheme accepted applications only to those homebuyers who were first home buyers to buy a new build home sold by a Help to Buy registered homebuilder. It required a deposit of 5% of the purchase price and the remaining 75% is supposed to be covered with a mortgage. The properties with a valuation of less than £600,00 were eligible for an or equity loan.
The equity loan has to be returned with the same percentage of the purchasing price. Suppose the selling price of the house appreciates, so the loan repayment got higher also. The same is true for the case when house prices depreciated.
- Shared Ownership or ‘Part Buy Part Rent’ Scheme
For persons with an annual income of less than £90,000 in London and their inability to buy a mortgage, shared ownership is a great option for them. ‘Part buy part rent’ works on the principle of buying a share of the property, between 10% and 75%, and paying rent to the landlord for the remaining property. The rent is determined by the value of the share of the landlord.
Similarly, a pay deposit between 5% and 10% of the buying will also be required from the home buyer. The remaining would be covered by a mortgage. Under staircasing, the buyer can buy more shares in future and pay less rent. So, shared ownership is a great and affordable option for buying a home in the heart of London.
- Part Exchange
Part exchange is between home buyer and home builder. Because a home buyer cannot buy another new-build house unless he sells his first house. As a result, the homebuilder and homebuyers make arrangements wherein the latter become the buyer of the first party. He pays the home buyer market-competitive home price. Later, home buyers can buy a second home and home builders can sell the first home at market valuation price.
What is the Right Strategy to Buy a Home in London?
Leaving a home for luck is most likely to lose money and you won’t get what you really need in your home. So, it’s essential you have the right strategy and tools to make your home buying journey smooth, affordable and convenient with the best options.
- Evaluate Your Options By Research or Taking Help from a Solicitor
Evaluation of home buying options like location, price and type of house affect the decision to buy a home. Essentially, evaluating these options according to the latest house market trends will help the home buyers choose the right home at reasonable prices.
Each step of evaluating your budgeting, mortgage, location and price options highlight many challenges and you can develop the right strategy for your new home. If you have done it right, you won’t regret your decision of buying a home at the desired location and at the most competitive price in London. The next step is to chalk out a budgeting plan.
If it seems a challenging and daunting task, you can seek help from a professional and expert solicitor who will give you best advice on the type of mortgages according to your budget and the type of property you are looking for.
- Outline a Budgeting Plan
Budgeting is the foremost step in the home buying track because it sets the direction and brings up the challenges and opportunities for the home buyers. Either you are a first-time home and buy to let investors, you cannot achieve a successful home buying plan without a proper budgeting plan.
A Budgeting plan takes into account the following factors:
- Expected Price of the Home
- Location and type of the house,
- Mortgage Costs with interest payments
- Solicitor Costs
- Valuation and Survey Fee
- Lender Product Fee
- Stamp Duty Land Tax
- Get the Right Mortgage
Banks, building societies and other lending institutions lend money to the home buyer which must be repaid at fixed or variable rate. The amount of mortgage and the repayment amount one can afford to pay greatly affect the mortgage term. For this, you may seek advice from a professional and experienced mortgage solicitor in London.
- Location for Buying a Home
Location is everything in buying the right property. It helps the buyers choose the location where there are affordable houses and the availability of all amenities are ensured. Other significant considerations are as follows:
- Council Tax
- Top-Tier amenities
- Environmental and Other Safety Measures
- Commute Distance from Work/Home
- Sustainable and serene neighbourhood
- Complete Documents with a Property Solicitor
Buying and selling property in London requires the expertise of a legal and administrative expert who has years of experience in this business. The professional solicitor will expedite the process of your home buying by offering the right strategies and completing all the necessary documentation. The probability of getting caught into fraudulent activities also minimises with a solicitor.
- Explore and Shortlist Properties
Many online platforms and web portals offer home searching tools which make the home buying process smoother. You can filter out your research and find the desirable home within your means and the budget at the best location in London.
- Get Ready for Negotiations
This is the most interesting yet tiresome process where the home buyers have to make offers to the landlords on price. After preparing a list of the shortlisted houses, the surveys of the places also begin and you need to pay attention to each aspect of the house because it is a lifetime decision and you cannot compromise on the essentials in a property.
- Complete contract and Move in New Home
After finalising the contract with the landlord, you can move in and start living in your own home. If it is a new build home, you can start decorating the home. Otherwise, you may need some renovations and fixtures to make it compatible with your living needs.
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The Bottom Line
Finally, buying a home in London is not as easy and simple as it seems to be but this process can be simplified with the right strategy. So, proper research and planning can help you achieve an affordable and comfortable house in London. Price and Location are the other factors which will affect your buying decisions. Obtaining a mortgage is another challenge in the home buying journey. Luckily, there are some government purchase schemes for people to find an affordable house in London.