Londoners wanting to buy a three-bedroom property in the capital now need to earn an extra £12,150, nearly a 12 per cent increase, compared to 2020, according to new figures from Zoopla.
This equates to a gross annual salary of £115,400, when three years ago, they’d ‘only’ have needed to earn £103,200.
For those wanting to buy two-bedroom homes, this figure works out at an additional £7,300, or a £97,100 gross salary, up eight per cent from £91,100 in 2020. The median annual salary in London is currently £41,866, according to Statista.com, suggesting buying a house in the capital is only becoming increasingly out of reach for most ordinary Londoners.
The newly released data also reveals that first-time buyers are the largest buying group, accounting for 34 per cent of property purchases. Rising rental costs are thought to be a major factor in fuelling both house prices and the number of first-time buyers.
With many landlords exiting the market, rents in London were up 11 per cent or £1,120 in the last year, with a third fewer homes available. Many Londoners with the necessary deposit and take-home salary are deciding to take the plunge and buy their first home — despite needing more of both to do this.
“We expect first-time buyers to have another strong year in 2023 having been the largest buyer group last year. They need more income to buy but are starting to look for smaller homes and get away from rapid growth in rents,” says Richard Donnell, Executive Director at Zoopla.
House price growth in London is currently at 0.5 per cent, compared to three per cent nationally, approximately less than a third of the levels recorded this time last year. It is expected that, by the end of the year, UK house prices will have fallen by one per cent as increased interest rates and more stringent affordability criteria start to take effect and dampen the previously runaway housing market.
“Housing market conditions continue to improve as buyers return to the market and more sales are agreed. House prices are posting very modest falls and are expected to be just one per cent lower by the end of the year. The worst of the pricing adjustment appears to be behind us.”
Potential first-time buyers can also take some heart from the fact that housing supply in the capital is up 66 per cent on last year. Three-bedroom homes remain the most in-demand property for first-time buyers, but higher mortgage rates mean that there has been a clear shift toward two-beds as they re-evaluate what they can afford in the wake of the mini-Budget. As previously reported by H&P, inner London flats are also looking particularly attractive as they’ve remained the same price since 2016, down 24 per cent in real terms.
"Demand and market activity in the London sales market is doing better than in other regions across Southern England. This is because house prices have lagged behind the rest of the market since 2016,” says Donnell.
“Inner London flats are looking like better value for money compared to houses in adjacent commuter markets — they aren’t cheap but do provide better value and are attracting demand from renters facing steep rental increases."
