London Help to Buy: the capital's new property hotspots for first-time buyers
The big boost to the Help to Buy scheme in London — announced by Chancellor George Osborne in last week’s Autumn Statement — is good news for frustrated young buyers in the capital, who have struggled to raise the huge deposits demanded by mortgage lenders.
The new rules beef up the scheme by doubling the interest-free loan available to buyers from 20 per cent to 40 per cent of a new home’s value. At a stroke, this reduces the minimum annual income needed to afford the average two-bedroom flat from £56,000 to £36,000.
Help to Buy homes in London
“It shifts the dynamics of affordability in London,” says Richard Donnell of property data analyst Hometrack. The average price of a two-bedroom home in London is £465,000. Previously, many young Londoners’ incomes were too low for a lender to approve a 75 per cent mortgage, leaving a shortfall that could only be bridged by the buyer putting down a huge cash deposit — often impossible for young savers with hefty rent to pay.
Buyers still need a deposit of at least five per cent of the purchase price, but now, with the increased Government-backed equity loan, they only need to find a 55 per cent mortgage, making them a much more attractive prospect for lenders.
Builders are already reporting a surge in enquiries about the newly revised scheme. The Government has made available an extra £2.3 billion, and the number of Help to Buy housing developments is increasing.
Together with the £600,000 price ceiling, the 40 per cent interest-free loan is generous and has opened up the market in all travel zones. Since April 2013, when the original scheme was launched, 3,128 Help to Buy loans have been granted in London, though there have been none in the most expensive boroughs of Westminster, Kensington & Chelsea, Camden and City of London. That may now change. The Government has also paved the way for cheaper starter homes that are 20 per cent below market value, which are likely to come through during the course of next year.
Shared ownership has been given a boost, too, and if buyers go down this route, the deposit required is five per cent of the equity chunk being bought, which is much more manageable. At Grand Union Apartments in Ladbroke Grove, the deposit needed when buying a 25 per cent share costing £125,875 is £6,294. Call Affinity Sutton on 0300 100 0303. Remember, too, that when saving for a deposit via a Help to Buy ISA, you can get a 25 per cent bonus up to £3,000.
Where to look for Help to Buy homes
The price limit for a Help to Buy home is £600,000. Only two London boroughs — Barking & Dagenham in east London and Bexley in the south-east — have average prices of less than £300,000, while average homes in Westminster and Kensington & Chelsea top £1 million. This leaves a lot in between, especially in the £400,000 to £600,000 price bracket, where Help to Buy applies. Start your search just beyond the congestion charge zone, where it is still possible to find good-value pockets of the inner city, some very much on the up.
Areas falling into this category include King’s Cross, Finsbury Park, Whitechapel, Shadwell, Deptford, Bethnal Green, Bow, Bermondsey, Rotherhithe, Dalston and Kennington. Base 17, in Walworth, still in Zone 1, has prices starting at £430,000. Call 020 3301 0800.
Traditionally, homes south of the river have been less expensive, but a catching-up process has kicked in. Check out the swathe of south-east London stretching from Woolwich via Dulwich and Herne Hill to Peckham, Camberwell and Lambeth. This takes in Catford, Hither Green and Lewisham.
Beyond the snaking South Circular Road are some leafy inner suburbs such as Earlsfield, Streatham and West Norwood, where homes are relatively cheap. Croydon has excellent train links to central London and plenty of new-build homes in the pipeline.
Regeneration zones and areas benefiting from transport upgrades appeal to buyers with an eye on investment growth. East London is where most new homes are being built. It is not one district but a sprawling mass — big and diverse, with raw and more refined neighbourhoods appealing to an expanding group of home buyers and renters.
Away from Canary Wharf’s waterfront towers, Shoreditch’s arty lofts and gentrified pockets around Victoria Park, homes are within the budget of first-time buyers. Some neighbourhoods remain edgy, but they are often colourful and cool, too. Help to Buy is even available in the Hoxton heartland. City Wharf overlooks Regent’s Canal and has 327 apartments priced from £585,000. Call Fabrica on 020 3642 8973.
St Paul’s Square, Bow, has Help to Buy flats priced from £375,000. Call Countryside on 07900 769752. At East City Point, Poplar, prices start at £290,000. Call 020 7473 1198.
Barratt has been quick off the mark in offering Help to Buy flats across London, with deposits starting at £15,300. Schemes include: Catford Green, where one-bedroom flats cost from £306,000; Edgware Green; Hendon Waterside; Enderby Wharf in Greenwich; Greenland Place in Deptford; Putney Rise; Waterside Park in Docklands, and Renaissance in Lewisham, where two-bedroom flats start at £470,000. Call 0844 811 4334.
Outer west London also offers plenty of choice for less than £600,000. Hounslow, feeding off Heathrow, is a hotspot. Last month, Galliard sold out 215 flats in three hours at its Trinity Square scheme. At 243 Ealing Road in Alperton, on the Piccadilly line, developer Hill is selling two-bedroom canalside flats priced from £434,950. Call 020 8997 3373.