Buying a house or flat in London

Average house prices in London

London is the most expensive place to buy a home in UK by a considerable distance. The average house price in London in December 2020 was £496,066 - almost double the UK average of £251,500, according to data from the Land Registry.

The chart below shows how average house prices London compare with elsewhere in England.
 

The capital is also the hardest place to get on to the property ladder. The average price paid by a first-time buyer in the city was £431,160 in December 2020, compared with £224,560 in England as a whole. 

First-time buyers in London put down a hefty average deposit of £130,357 in 2020, according to Halifax. This was more than twice the UK average first-time buyer deposit of £57,278.

• Find out more: how to save for a mortgage deposit

Cheapest areas to buy

London is certainly an expensive place to buy a home, but property prices vary significantly depending on which borough you're buying in. 

According to data from the Land Registry, these were the cheapest areas of London in December 2020:

The most expensive areas of London are as follows:

• Find out more: finding the best place to live

Cost of living in London

In addition to the costs of buying a house, you'll need to consider extra expenses such as council tax and commuting.

Each borough sets its own council tax rates, meaning you'll need to pay significantly more in some areas than others. For example, council tax rates in Wandsworth are less than half those in Waltham Forest. 

You can use our interactive map to find out the average house price in every London borough. The table below the map also shows the council tax rates for 2021/22 and travel fares (as of March 2021) for every borough. 

• Find out more: the household bills you'll pay as a homeowner

Getting a mortgage for a London property

Getting a mortgage for a home in the capital can seem like a daunting task, especially if you're a first-time buyer. 

Before you start looking for homes, it's important to work out how much you can borrow, to get an idea of the types of properties you can afford and how much deposit you'll need.

• Find out more: deposit calculator - how long will it take you to save what you need?

How much can you borrow?

As a general rule of thumb, banks will let you borrow up to 4.5 times your total annual income.

So if you have an income of £30,000 and you're buying on your own, you're likely to be able to borrow up to £135,000. If you're buying with a partner with the same income, this will double your borrowing power to £270,000. 

A mortgage lender will also consider a variety of other factors such as your credit rating, personal circumstances, any debts you owe and your average spending.

While online mortgage borrowing calculators will give you a rough idea of budget based on your income, it's worth speaking to an impartial mortgage broker for an accurate, personalised view on how much you'll be able to borrow.

• Find out more: how mortgage lenders decide how much you can borrow

Property types that can be difficult to mortgage

New-build properties

Some mortgage lenders put stricter limits on the maximum amount they'll lend if you're buying a new-build property.

For example, you might be restricted to borrowing 85% of the value of a new-build house, or 75% on a flat, compared with 90% or even 95% on an older property.

Studio flats

Due to their compact size and niche demand, studio flats can be a red flag to lenders as they may be trickier to sell when you're ready to move on. 

As a result, you could struggle to get a mortgage for a studio apartment, or at least face some extra criteria such as a minimum floor space requirement.

Short leases

Leases with fewer than 80 years remaining are often more expensive to renew, leading to the value of the property falling.

Lenders can be reluctant to grant a mortgage for properties with short leases, as they can be difficult to sell.

• Find out more: types of property to avoid if you want to get a mortgage

Housing schemes for first-time buyers

London Help to Buy

Under the London Help to Buy scheme, people buying a new-build home in Greater London can apply for an equity loan of up to 40% of the property’s value.

This loan is more generous than Help to Buy schemes elsewhere in the UK, which offer up to 20% of the property's value.

With London Help to Buy you can put down a deposit of 5%, borrow up to 40% of the property price from the government and take out a mortgage on the remaining 55%, potentially unlocking lower interest rates and improving your chances of getting accepted by a lender.

London Help to Buy equity loans are available to first-time buyers and existing homeowners who are looking to buy a new-build property that costs up to £600,000. From 1 April 2020, they'll be restricted to first-time buyers only. 

• Find out more: London Help to Buy

Shared ownership

Shared ownership schemes are popular in London, as many buyers simply can't afford to buy properties at full price.

Shared ownership involves buying a share of between 25% and 75% in a property and paying rent on the remainder. 

You can increase your share at a later date, known as 'staircasing', allowing you to build towards full ownership. 

These schemes may appear attractive at first, but can be very expensive in the long run. Before buying, do your sums to ensure you'll be able to afford the combined cost of your mortgage payments, rent and any service charge. 

• Find out more: shared ownership

Mortgage guarantee scheme

In the 2021 Spring Budget, the Chancellor announced that the government would unlock 95% mortgages for first-time buyers through its new mortgage guarantee scheme.

The scheme will involve the government offering assurances to lenders to encourage them to bring back the low-deposit mortgages that have disappeared since the start of the Covid-19 pandemic.

• Find out more: 95% mortgage guarantee scheme

'First dibs' for Londoners

In 2018, Mayor of London Sadiq Khan announced that lower-cost new-build homes worth up to £350,000 would be offered exclusively to people who live or work in London for the first month of the property being on the market.

Buyers based in the rest of the UK can also make offers from the second month, before the properties can be marketed to overseas investors after three months.

We contacted the Mayor of London's office in March 2021 for an update on the scheme and are awaiting a response. 

London Living Rent

London Living Rent is an affordable housing scheme designed to help middle-income Londoners onto the property ladder.  The properties will have below-market rents, so you can save the leftover cash each month and build up a deposit that will enable you to buy.

Tenancies, which cover how long you can live in the property, will be available for at least three years. During this time you'll be given the option to buy the property on a shared ownership basis.

To be eligible for the London Living Rent scheme, you must:

• be renting in London;
• have a household income of up to £60,000;
• be unable to currently buy a home (including through shared ownership) in your local area.

As of March 2021, the Mayor of London's office says it is currently allocating money to councils and housing associations to build London Living Rent homes, which will be built and become available 'over the next five years'.

• Find out more: affordable housing: can you buy below market value?

London commuter towns

Choosing to live further out from the city can open the door to cheaper property prices. 

Make sure you factor the cost of commuting into your budget, to ensure the potential savings you'll make on mortgage payments won't be cancelled out by rail fares. The reliability of trains can also be a drawback, so carefully research areas before settling.

• Find out more: how to buy a house or flat