Asking prices in London fall but where are the cheapest homes?

Homebuyers in London may be able to snag a bargain, with asking prices in the capital now lower than last year, according to new data. But where are the cheapest areas to buy?

Figures from the latest report, by consumer intelligence firm Twenty Ci, revealed that West Central London saw the largest decrease, with asking prices falling 15% year on year. The average in the area, which includes Camden, Islington and the City of Westminster, is now £907,801.

The second-highest drop was in East Central London, which includes Hackney and Tower Hamlets, and asking prices fell 13%compared with January 2018 to £806,579. In North-West London, meanwhile, the average asking price fell to£947,691, a 10% decrease year on year.

Despite the dip in prices, however, most of these areas of London remain unaffordable for buyers hoping to get on the property ladder.

Here we take a lookat housing affordability in London and where you can find the cheapest properties.

London housing affordability reaches critical levels

With house prices in London still sky-high, buyers often struggle to find homes they can afford - especially if they're on a low income and renting.

The Twenty-Ci data found that London workers earning in the bottom 25% of salaries wouldn't be able to buy properties in the lowest 25% price bracket.

In order to do so, they'd have to spend 70% to 131% of their annual take-home pay on a mortgage, even accounting for a deposit.

Another symptom of the lack of affordable housing is the proportion of properties listed for sale compared with those available for rent.

In the fourth quarter of 2018, almost 60% of all London listings were for rental properties, compared with 40% in all other major UK cities.

The chart below shows the proportion of sales listings compared with rental listings in London.

Getting a mortgage in London

With property prices in the capital as high as they are, getting a mortgage for a home in London can seem daunting, especially if you're a first-time buyer.

Before you start your search for homes, it's important to work out how much you can afford to borrow, to get an idea of the areas you could realistically consider buying in and what types of property.

Mortgage lenders are allowed to offer a loan of up to four-and-a-half times the total annual income of you and anyone else you're buying with.

They'll also consider a range of other factors including your credit score, debts you owe, your average spending and your personal circumstances more generally.

Check out our guide for tips and advice on buying a house or flat in London

Cheapest properties in London

In today's market, buying a home in London can seem like a farfetched dream but there are several areas offering cheaper properties.

We've rounded up the lowest-priced homes in the least expensive areas to buy a property in the capital.

Our table also allows you to compare homes available through the shared ownership scheme.

Source: Rightmove, correct as of 31st Janurary 2019

Barking and Dagenham

Shared ownership

• Northgate Road, Barking
• 1 bedroom apartment
• £62,500 (30% share)

Not shared ownership

• Auriel Avenue, Dagenham
• 1 bedroom flat
• £140,000

Bexley

Shared ownership

• Phoenix Point, Poplar Place
• 1 bedroom apartment
• £42,500 (25% share)

Not shared ownership

• Frobisher Road, Erith
• 1 Bedroom Maisonette
• Offers over £100,000

Newham

Shared ownership

• Hyle House, 119 Walton Road
• 1 bedroom apartment
• £58,750 (25% share)

Not shared ownership

• St Andrew's Road, Plaistow
• 1 bedroom flat
• £140,000

Schemes to help you buy in London

If you're struggling to buy, we've rounded up three government schemes that could help you secure a home in the capital.

Help to Buy London

Governments in England, Wales and Scotland all offer equity loans to help buyers buy a property. London has its own version of the scheme which offers more money than the anywhere else in the UK. The scheme is open to first-time buyers and home movers looking to buy a new-build home worth £600,000 or less.

Under London Help to Buy, if you buy a new-build home in Greater London, you can apply for an equity loan of up to 40%. This means that you can put down a deposit of 5%, borrow up to 40% of the property value from the government and take out a mortgage on the remaining 55%.

The loan is interest-free for the first five years, after which you'll have to start paying monthly charges. You'll need to repay the loan in full after 25 years or when your mortgage ends - whichever comes first.

• Find out more: help to buy London

Shared ownership

If you can't afford to buy a home outright, shared ownership could help you secure a property.

The scheme involves buying a share of a property - usually between 25% and 75% - and paying rent on the remaining portion.

Some shared ownership schemes allow you to increase your share in your home at a later date through a process called 'staircasing', allowing you to build towards full ownership.

• Find out more: shared ownership

Rent to Buy

Rent to Buy was introduced to help prospective buyers struggling to save enough of a deposit to get on the property ladder.

The scheme allows you rent a property at 20% below the normal market value for up to five years. During this time, you'll get the option to buy the whole property or part of the property through the shared ownership scheme.

The supply of Rent to Buy properties is very limited and you may have to pass further eligibility criteria depending on the housing association the property is offered under.

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

Get help from the experts

Whether you're trying to get onto the property ladder or hoping to move onto the next step, buying a property can be daunting and complicated.

Speaking to an impartial mortgage broker can help you find the best deals for your financial circumstances and help make the process run as smoothly as possible.