The hunt is on for London's rare property gems under £250,000

London’s property market is becoming increasingly polarised - finding a home for £250,000 or less is becoming more difficult, but there's expanding choice at the top end of the market.
A new report reveals availability of homes priced £250,000 or less in the capital has plunged by 14 per cent in a year, with most of those that remain being found in Newham, Enfield, Croydon, and Barking and Dagenham.

Lucian Cook, director of residential research at Savills, says only 75 out of 627 council wards across London had an average price of £250,000 or less. He believes it is a stark reflection of how rising house prices affect the whole capital.
 
“The shrinking market under £250,000 reflects the extent to which prices in London have risen over the past five years, and been dislocated from the rest of the UK,” he adds.

Paul Smith, chief executive of Haart estate agents, says: “Not only are homes under £250,000 gold dust to first-time buyers in the capital, but investors are also on the hunt for them.

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“The strongest yields can be achieved on properties of this value, and London is still viewed as the global hotspot for property investment.”

Smith believes this shortage is driving first-time buyers — at an average age of 32 — out of London in search of a family home. 

“We are now starting to see more first-time buyer activity outside the capital than inside,” he says.

“You can get a three-bedroom semi-detached house in Chelmsford for £250,000, but in London — even somewhere outside the centre like Wembley — you’d be lucky to get a two-bedroom flat.

“Young professionals are increasingly doing a balancing act, weighing up their commute against the quality and size of their home — and home is increasingly coming out the winner.”

David Fell, research analyst at Countrywide, believes that part of the reason for the shortage of homes under £250,000 is the Government’s decision to reform stamp duty last year, replacing the old slab structure with a tapered system. 

“We are now seeing homes that would have come on to the market at £250,000 before the change, marketed at £260,000 or £270,000,” says Fell. 

Like Smith, he sees first-time buyers being forced further away from central London. “A decade ago, the focus of first-time buyers was in places on the Zone 2/3 border such as Hackney, Deptford and Crystal Palace,” he adds. 

“Today, stretched affordability means new buyers have to look further and further afield to get on to the housing ladder. Places like Walthamstow, West Ealing and Croydon are now the starting point of many first-time buyers’ home searches.”

Meanwhile, at the other end of the scale, homes priced at £500,000 or more increased by just more than 22 per cent.

Vincent Dennington, associate director of John D Wood in Weybridge, says: “We have been taking on a lot of property about £500,000 and it has been selling quickly to both owner-occupiers and investors. 

“As mortgage rates are low, people are seizing the chance to move up the property ladder while they still can. Many people are concerned they might not be able to afford to upsize their home in the future if prices continue to go up, so they are making the move now.”

In the South-East the research, compiled by market analyst Experian, shows that a similar picture is emerging, with the number of homes for sale at less than £250,000 down by 10 per cent, and homes at more than £500,000 up 25 per cent.

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