Increasing numbers of initiatives are launching to encourage Londoners to buy their first home.
Last week, London Mayor Sadiq Khan announced a new ‘first dibs’ policy allowing people living in London access to new-build developments before overseas buyers. This was just the latest in a raft of schemes designed to help first-time buyers in the capital.
The Mayor also plans to start construction on 90,000 new affordable homes by 2021, with two-thirds of them aimed at first-time buyers – but which scheme will help you get your hands on one? Which? investigates.
‘First dibs’ policy
Research commissioned by the Mayor’s office found that 13.2% of new-build properties in London are sold abroad, with more than half of the homes sold to overseas buyers costing under £500,000.
The research also found that many new-build homes are being snapped up by overseas investors before first-time buyers even know they’re available. Given the current shortage of affordable homes, the Mayor argues this is making it even harder for first-time buyers to get on the ladder.
Khan has now introduced a ‘first dibs’ policy whereby new-build properties costing up to £350,000 will be exclusively available to Londoners for the first month, and UK buyers for the two months after that. Only after three months will the homes be available to overseas buyers.
Members of the Home Builders Federation (HBF) and the G15, which represents London’s biggest housing associations, have already signed up to the voluntary policy.
- Find out more: how to buy a home
London Living Rent
If you’re renting, have a household income of £60,000 or less and are currently unable to buy a property, you may be eligible for a London Living Rent (LLR) home.
Under the scheme you’ll rent the home for two-thirds of its market value with a view to buying it on a shared or full ownership basis within 10 years. The minimum tenancy is three years.
Rents are set locally at one third of the average (median) household income for that area of London.
The average rent on an LLR home across the city is £1,004 per month for a two-bedroom property. For a one-bedroom home it would be 10% lower, three bedrooms 10% higher and four bedrooms 20% higher.
London Living Rent homes will become available over the next five years, with some properties already up for rent. You can find out more on the Mayor of London’s London Living Rent page.
London Help to Buy
If you’ve already saved up a bit of a deposit and want to get on the property ladder sooner rather than later, London Help to Buy could be the answer.
You can put down a deposit of as little as 5%, with the government providing an equity loan of up to 40% of the property’s value, meaning you only have to take out a mortgage for the remaining 55%.
This makes you more likely to be accepted for a mortgage, and also gives you access to lower interest rates.
The scheme is open to people buying a new-build property costing £600,000 or less.
- Visit the Homes for Londoners website to search homes in the capital
Shared ownership allows you to buy between 25% and 75% of a property using a deposit and a mortgage, and pay rent to a housing association on the remaining share.
In London, anyone with a household income of less than £90,000 is eligible (£80,000 outside London). You can buy bigger shares of the property as you go along – this is called ‘staircasing’.
On the plus side, shared ownership means you can get on the property ladder sooner and it can be cheaper than renting.
On the downside, however, it can be difficult to staircase if the value of your home increases, and getting a shared ownership mortgage can be tricky.