The most affordable London homes for first-time buyers

The most affordable London homes for first-time buyers

By Katherine Odams

Looking for the best areas in London for first-time buyers? Zoopla reveals where can you find the most value.

When it comes to taking your first step on to the property ladder, location is often key. Affordable places to live in London can be hard to come by and there’s a strong chance that your top choice will be financially out of reach.

This is where Zoopla can help. Our latest data examines average house prices to show exactly how much a first-time buyer needs to earn and save for a deposit to buy a home in the capital.

If you’re thinking about buying in Greater London, our map, below, shows you the postcode areas that are most affordable.

Heat map of the most affordable places to buy in London

(Click on map for larger version)

Quick stats about London:

  • The average first-time buyer property (one-to-two-bedroom homes) in Greater London costs £509,047 with the average deposit required being £126,600.
  • This makes the average income required from a first-time buyer household in London £103,642. 
  • Before the first two stats put you off entirely, understand that these figures are skewed by central London locations that are among the most expensive places to live in the world. By looking away from these areas you will find considerably better value.
  • The most affordable area is DA18, which sits south of the River Thames to the east of the city and contains Erith Marshes and part of Thamesmead. The average house price for first-time buyers in the area stands at £173,609, requiring a deposit of £43,177 and a household income of £32,608.
  • If that's too far out and you’re looking to buy closer to the centre of London, try IG11, which contains Barking and Creekmouth. The area offers excellent transport links, with the District Line, Hammersmith and City Line, C2C and Overground available at Barking station. The A13 is also at hand, running all the way into Aldgate in the city and out into south Essex.
PostcodeAreaAverage house priceAverage deposit requiredAverage household income required

How have we calculated it?

By looking at the average price of one-to-two-bedroom homes, the most common type of property purchase for first-time buyers in Greater London.

We've then taken the average mortgage advance from lenders in the area and worked out both the average deposit required and the amount that needs to be earned based on buyers being able to borrow up to four times their salary.

How can I afford a home as a first-time buyer?

The first step to getting on the property ladder is to build as big a deposit as possible. This allows you to borrow a lower percentage of the overall value of the property, as lenders feel secure enough to give you a better mortgage rate.

If you want to attain a low interest mortgage, aim for a 10% deposit at minimum. In some cases it is possible to put down a deposit of just 5%, but this will mean paying a higher interest rate on your loan – and result in costlier monthly repayments.

If you need help building a deposit, the Government has dedicated Help to Buy schemes available. The Equity Loan scheme, where the Government chips in by lending you 20% of the purchase price interest-free for the first five years could also be an option. However, you will only be able to use it on a new-build home valued up to £600,000 in London and Greater London.

As long as you have a solid credit score, banks and building societies will usually lend up to an average of four times your salary. If you are buying as a couple, you can combine your incomes to help increase your borrowing power.

Knowing how big a deposit you have accrued and understanding how much you might be able to borrow, means you can assess how much you can afford to spend on a property. You can then begin your search.

Don’t forget to budget for the other costly fees that will pop up along the way, including solicitor and moving costs. Fortunately for first-time buyers, stamp duty land tax is waived on the first £300,000 of their purchase.

For more help purchasing your first home, read our first-time buyers guides here.

First-time buyer affordability in the South East

If affordability for first-time buyers in and around London still seems stretched, then you can branch out your search into the rest of the South East.

Homes for first time-buyers in the South East cost £339,510 on average, requiring a deposit of £58,090 and a household income of £71,524 – substantially less than London’s averages, but still far pricier than the rest of the country.

Despite the region being one of the least affordable in the country, there are still pockets where you can find affordable homes.

First-time buyers should try heading east into Kent, to Dover, Queenborough and Chatham, where you’ll find the lowest house prices to earnings ratios.

Other coastal options include Portsmouth and surrounding areas such as Gosport and Havant. Parts of Southamptonare also suited to first-time buyers

Heat map of affordable place to live South East

(Click on image for larger map)

First-time buyer affordability in the UK

If you're prepared to cast your search further afield, then our first-time buyer affordability map of the UK, will help. Outside of London and the South East there are still plenty of areas where those with household earnings of under £30,000 can take a first step on the ladder.

It's also worth noting that while the UK-wide map might provide a helpful overview, the property market varies on a far more local level and you really need to take a closer look at specific locations, like we've done with London, above to seek out value.

Map showing affordable housing in the UK for first-time buyers

Full methodology: House prices taken from a subset of Zoopla-partner Hometrack's stock valuation database (one-to-two bedrooms for London and two-to-three bedrooms for rest of UK). Median price calculated as of June 2018. Median advance taken by region (c75% for London, c85% outside of London) from UK Finance. Term of Mortgage: 25 years. Interest rate: 2.00%. Loan to income ratio: 4.0. Earnings required for affordability is greater of those required to satisfy loan-to-income threshold or income required to service the mortgage.

You might also be interested in...