Are falling London property prices an opportunity for first-time buyers?

It seems like London property prices are constantly in the press. Even the smallest flats are seemingly out of reach for first-time buyers. But prices have fallen slightly, so is now the right time to make the move and purchase your first home?

For years, London property prices have been climbing. Those lucky enough to have purchased a property have made significant profits when they’ve sold. The increases have been welcomed by those already invested in the market, but it has come at a cost.

Many Londoners, especially younger generations, have been priced out. The continual rises mean that pulling together a deposit and then finding a home that falls within budget can seem like an impossible task.

However, the London property market has experienced a dip, according to the official UK House Price Index. It could present an opportunity for first-time buyers that have been waiting to put in an offer.

  • The average house price in England increased by 0.3% between May and June 2018; while the capital saw a fall of 0.6%
  • In the year to June 2018, England overall experienced property prices rising by 2.7%; London homes increased by just 0.7%

Of course, house prices in the capital are still far above the national average. The average property value in England is £245,076; compared to £476,752 in London. But the slight dip does offer a chance for first-time buyers to get their foot in the door.

Some analysts predict that London house prices will fall further, affected by economic uncertainty.

A poll conducted by Reuters indicated that there is around a 30% chance that property value will decrease over the next 18 months in the capital. Overall, London prices are expected to fall by 1.6% this year and remain almost stagnant in 2019, according to the housing market specialists.

However, it’s important to realise that there are numerous factors influencing the property market. This means accurate predictions are difficult to make. The poll responses also varied hugely, ranging from describing the change as a ‘short-term fall’ to a ‘disaster’.

How does this help first-time buyers?

A fall in property prices makes it a buyers’ market. Even a small change can make buying your home more accessible; especially when you consider how expensive purchasing a home in London can be.

If you’ve already been working towards buying a home in the capital and feel as though the goalposts have been moved every time it’s been achievable, the stall in price rises could be beneficial.

  • Your deposit may now go further
  • You may be able to afford homes in different areas
  • Potentially access better rates of interest

Six steps to help you secure a London property

Even if London property prices continue to decrease, there are still challenges when buying in the capital. Taking these steps can help make your dream a reality:

1. Improve your credit score: Your credit score has a big bearing on the interest rate you’re offered; it can even mean being rejected by a lender. As a result, when you’re searching for a mortgage, whether it’s in London or not, it’s always worth investing some time to improve your credit score. Improving your credit score isn’t a quick fix. But simple steps, such as registering on the electoral roll and removing any mistakes from your report, do have an impact.

2. Shop around for mortgage deals: The first deal you find isn’t always the best one. Shopping around could mean you find a lender that’s willing to accept a lower deposit, offer improved interest rates or specifically caters for first-time buyers. Lenders have a varied view on risk, so the amount you’re offered can differ significantly, giving you more freedom when searching for a home. Working with a mortgage adviser can give you access to lenders you wouldn’t have otherwise approached.

3. Use an ISA to save a deposit: With property and rent prices so high in London, saving a deposit can be a struggle. Taking advantage of the tax-efficient savings accounts can help. A Lifetime ISA (LISA) is worth investigating for aspiring first-time buyers. You can add up to £4,000 a year to the account and receive a 25% government bonus, cutting down how long saving will take. To open a LISA, you must be aged between 18 and 40. It’s also worth noting that withdrawals before you turn 60, that aren’t for a house deposit, will incur a penalty.

4. Take advantage of Help to Buy equity loans: You can purchase a house with just a 5% deposit when using the Help to Buy scheme. In London, you can then get a government loan of up to 40% of the property’s value, taking out a mortgage on the remaining 55%. If lenders aren’t willing to lend you enough to purchase, this scheme can help. The government loan is interest-free for the first five years.

5. Search for Shared Ownership properties: Another alternative if London prices are too much, is to investigate Shared Ownership properties. You’ll buy a portion of the property, usually starting at 25%, and pay rent on the remaining share; think of it as a hybrid between buying and renting. It might not be an ideal solution as the whole property isn’t yours. But it does provide you with a way to get a foot on the property ladder and progress in the future.

6. Research London locations that offer value: London’s property market is diverse. The price of the average property can vary hugely between a single tube stop. Take the time to research the locations that offer the best value. You may find widening your net uncovers hidden gems and makes the process more affordable. On that note, it’s also worth looking at which areas are considered ‘up and coming’ and have the potential to offer you the biggest return when you come to sell.

If you’re a first-time buyer in London and want to benefit from independent advice to help you find the right mortgage, contact us today to discuss your next steps.