Every lock has a key


21st January 2017

We have a major issue in London in regards to affordability.  For example, the average wage in Westminster is £36k per annum, whilst the average property price in Westminster in 2016 was £1,527,280.  So the average property price is 42 times the average salary.

A typical mortgage product allows a borrowing of 4-5 times the annual salary, this means the average person in Westminster, earning an average wage of £36k, can only borrow £180k.   You would probably struggle to purchase anything for this amount, probably in all of London.

Is the solution to get married?  If it’s a couple, you have a slightly better chance as the borrowing would double to £360k, this would at least allow you to buy in the outskirts.  The average property price in London stands at £527,349 as of August 2016.  So there’s a possibly of purchasing a smaller property for this amount in the fringes of London.

The income multiples applied by mortgage lenders do not work not anymore.  They last worked in 1995 when the average property prices were 3.2 to 4.4 times the average salary in the UK.  With numbers on the higher side of 4.4 in London this translated to an average salary being £19,000 and the average house price being £83k.

Blaenau Gwent in South Wales is the cheapest place to buy a home, with an average property price of £75,000.  To afford a typical two or three bedroom terraced house in this area, single buyers need to earn just over £13,000 a year.   As the average income in Blaenau Gwent exceeds this by £6,000, this is named as the most affordable place for single buyers to get onto the property ladder.

The Evening Standard dated 16th January 2017 reads: “Homes priced at less than £300,000 are now an “endangered species” in London as huge demand forces up values in the capital’s last affordable neighbourhoods.”

The number of wards where prices averaged below the £300,000 mark plummeted from 104 to 40 last year, most of them in the outer fringes of east and south London, according to research.

This means the majority of buyers for property in these locations fit into three broad categories:

  1. rich end users
  2. foreign investors
  3. local investors

Although in this article we have considered the purchasing ability, the same affordability issues exist on the rental side.  The average rental price in Westminster is £818 per week. It’s clear in many, if not most, parts of London the people who work there cannot afford to live there.

However, where there is a problem there’s often an opportunity.

Demographics are shifting, the family nucleus is breaking down, individuals are staying single for longer.  They no longer cook at home, these and many more indicators suggest a solution is required, to not only suit the budget but also the lifestyle.

We will be showcasing our solution for the London property market in our event in Wembley, on the 25th January 2017, which presents an exciting opportunity for investors.  Spaces are limited at the event, so be quick to book your place.

Suresh Vagjiani

Suresh Vagjiani
Suresh Vagjiani
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