For the last few years, the London property market has been one of the most talked about in the world. Before the crash it was talked about because of the rapid rate at which property prices were growing, especially prime properties, and the fact that first time buyers were being priced out of the market.
London was then hit hard by the crash, but when UK prices started to grow fuelled by weak supply and government stimulation in April 2009, London returned to its old ways. In fact, if it weren’t for the exceptional shortage of supply in London, some believe that the UK average house price indices wouldn’t have shown the rises they did.
Now that is certain, house prices are stagnating around the UK, but in London and the south they are growing. Houses never got affordable for first time buyers in the capital (they never got affordable anywhere but that is another story), because prices never fell far enough, and because the banks are demanding bigger deposits. And the situation is continuing to get worse as prices rise.
In fact, according to research from bank and mortgage lender First Direct, buyers in London are paying 10 times the deposits they were 20 years ago, while salaries have barely tripled during the same period. Combined with the price rises of late, the reduced amount banks are willing to lend means that those looking to buy in the capital last year would have found it more difficult than at any time in the last 20 years.
“Much has been made of rising house prices, but the average deposit needed in the first place has actually risen more than twice as fast as house prices and almost four times as fast as income,” said Bruno Genovese of First Direct. “This is why we are seeing first time buyers getting older, with more and more people struggling to get on the property ladder.”
What’s worse is that, because of the buying situation, renters are starting to find difficulty in finding somewhere to stay that they can afford as well. With less and less first time buyers able to get on the property ladder, rental demand is soaring.
This is fuelling record rent rises, and pricing people out of the rental market. This then forces more and more people to look at the option below that, which is renting a room, and the latest evidence shows that demand is even outstripping supply for rooms, and again, prices are rising.
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