How Much? Study reveals true costs of first home

A new study of London’s property market has revealed the salaries first time buyers must earn to get on to the housing ladder in the capital.

Original research by Motive in partnership with House of Data (HoD) has revealed the exact salaries first time buyers need to be earning to buy a house in each of London’s boroughs.

The research reveals the stark reality that anyone on London’s average full time salary of £36,000 is unable to buy a home in even the most affordable boroughs unless they team up with a partner or friend.

Even then they must choose their location carefully with most having to move far out of town to gain a toe-hold in the property market.

The research lays bare the huge discrepancies at play within London’s property market with some boroughs requiring more than double the earning power than others to afford a house.

In a bid to locate the first time buyers in each London borough researchers from Motive and HoD looked at the average value of the of the cheapest 20% of houses sold based on Land Registry data from late 2019.

They then factored in a ten per cent deposit and worked back from there to find the salary a first time buyer needed based on a typical mortgage offer of 4.5 multiple of their earnings.

The researchers found East London and the outlying boroughs to be the most affordable with a salary of £45,000 enough to get on the ladder in Redbridge – slightly less than neighbouring borough Barking and Dagenham where a £46,000 salary was enough to buy a home.

South of the river Bexley could appeal to first time buyers willing to commute, with a combined salary of just £48,000 needed to clinch that elusive first home.

With many first time buyers choosing to buy a property as half of a pair these salary levels are still within reach of many young working couples.

A couple each earning the average London salary of £36,000 would collectively earn £72,000 and could in theory afford to buy a house in all of London's outer boroughs, and even in some central areas.

However property in certain areas of the capital, particularly central and West London, is much less affordable with first time buyers needing to earn a whopping £92,000 in Westminster and £94,000 in Kensington and Chelsea.

A spokesman for Motive said: “House prices in London are much more expensive than the rest of the UK but this research shows it is still possible for first time buyers to get onto the property ladder in the capital if they buy together and choose the most affordable boroughs.

“It’s not great news for singletons though who may need to first find true love before they can find their own home.”

The data clearly shows that only those on high salaries can afford to buy their first home in central London. Even boroughs such as Tower Hamlets and Hackney, which were still seen as offering value until relatively recently, now require first time buyers to earn substantial salaries if they are to own their own home.

Our researchers did not include the City of London local authority in the study due to the very low number of properties sold there during the period of the study.

© MOTIVE