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London house prices push out buyers: how to buy a home in the capital

More than 30,000 Londoners purchased homes elsewhere in the first half of 2018

A record proportion of Londoners are leaving to buy homes elsewhere in England, as slow wage growth and high property prices prevent them moving up the ladder in the capital. So, is it still possible to buy a home in London?

New research by estate agency Hamptons International claims there’s been a 16% year-on-year rise in the proportion of Londoners buying outside of the capital.

Here, we take a look at where these buyers are moving to, and offer advice on whether you can still get your hands on a property in London with a small deposit.

Where are the Londoners moving to?

The number of Londoners buying homes outside of the capital reached 30,280 in the first half of 2018, up from 26,180 for the same period in 2017.

And while many (38%) remain in the South East, the North of England and Midlands are seeing the biggest increases in migration.

These two areas now sweep up a fifth (21%) of buyers leaving London – that’s up from just 6% a decade ago.

Buyers leaving London to upsize

One of the main reasons people are leaving London is to upgrade to a bigger home that they wouldn’t be able to afford in the capital.

Indeed, on average a Londoner buying outside of the capital paid £424,610 for their property, a figure skewed significantly by those buying in the South East (£575,010) and South West (£544,580) of England.


First-time buyers buoyed by stamp duty relief

While prices in London remain unaffordable for many savers, the proportion of first-time buyers leaving the capital to buy elsewhere actually dropped in the first half of 2018.

In this period, around a third of first-time buyers living in London bought their first home elsewhere, down 2% on last year – although still almost double the proportion recorded in 2013.

Hamptons believes this his due to the new stamp duty relief for first-time buyers spending under £500,000 and the continuing availability of the Help to Buy scheme.

For example, a first-time buyer purchasing a £350,000 home in the capital now pays £2,500 in stamp duty, down from £7,500 before the rule change.

How to buy a house in London with a small deposit

95% mortgages

95% mortgages are growing in popularity again, with more lenders coming to the market in the last year and rates dropping.

35-year mortgage terms are now commonly offered, too, allowing buyers to spread the cost of the loan over a longer period.

Though you might be able to get a cheaper rate using Help to Buy (more below), traditional 95% mortgages are available across the market, not just on new-build homes.

Help from a family member 

You might have heard about the Bank of Mum and Dad helping lots of first-time buyers get on to the ladder.

And while many parents (or other relatives) loan or gift money towards a deposit, there are some other options that require less cash upfront, such as guarantor mortgages, joint mortgages and remortgaging to free up cash.

For more information, check out our full guide on how parents can help first-time buyers, and always get professional advice before linking your finances with another individual.

London Help to Buy

London Help to Buy allows first-time buyers and home movers to get an equity loan of up to 40% of a property’s value from the government.This means you can buy a property with a deposit of 5% and get a mortgage for the remaining 55%.

To use London Help to Buy, you need to be buying a new-build home priced at £600,000 or less.

The Help to Buy scheme has been very popular with first-time buyers but has attracted criticism for inflating the prices of new-build properties.

Shared ownership

Shared ownership is when you buy a share of a property (typically from 25% upwards) from a housing association and pay rent on the remaining share. You can then buy additional shares in the property at a later date – a process known as staircasing.

Shared ownership schemes have previously been criticised for their overall costs, with mortgage payments, rent and service charges making them unaffordable for some buyers in London.

Find the best places to live

If you’re thinking of joining the London exodus, use our area comparison tool to help you find a new place to live.

Simply enter a postcode or type a local authority below to find out about the number of good or outstanding schools, quality of life and average house prices.


Getting advice on your mortgage options

Wherever you’re buying a home, it can be helpful to get impartial, expert advice on finding the right mortgage.

You can fill in the form below for a free call back from a mortgage adviser.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

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