Housing affordability continues to be a challenge, especially for first-time buyers in London, where deposit requirements have hit unprecedented levels. Currently, first-time buyers must save a staggering 30% deposit, averaging around £142,588. This is nearly two and a half times the national average of £58,000. In comparison, the average first-time buyer property in London is priced at £469,740—85% higher than the UK average of £253,417.
Even with a muted property market, house prices in the capital are on the rise. Rightmove reports a 1.8% increase in asking prices in London in September alone, the largest jump of any region. With the expected base-rate cuts in November and December, sales and prices may further rise over the winter.
Labour’s Housing Ambitions: A Tall Order?
The new Labour government announced ambitious plans in July, aiming to double housebuilding rates in London. Their goal is to deliver 80,000 new homes annually, a significant jump from last year’s 35,000. However, hitting these numbers is a massive challenge, especially with developers needing to sell 45,000 homes at market rates each year to fund social housing projects.
Experts warn that unless there’s a clear market for these homes, developers may hesitate to build. “Turbo-charging construction is fine, but developers won’t build if they don’t see demand,” says Marcus Dixon, Director of Residential Research at JLL.
No Relief in Sight for First-Time Buyers
While there’s significant focus on boosting supply, affordability remains a critical issue for many would-be homeowners. High rental costs make saving for deposits difficult, and the property industry is pushing for the return of schemes like Help to Buy. However, with the government’s focus shifting toward funding social housing, many experts, including Paula Higgins, CEO of HomeOwners Alliance, are skeptical about any substantial support for first-time buyers in the upcoming Budget.
Rumors suggest that the government may reverse the stamp duty discount set by the Conservatives. If the threshold drops from £425,000 to £300,000, more London-based buyers will face higher stamp duty bills. Currently, 37% of first-time buyers pay stamp duty in London—a figure that could rise to 71% if changes are implemented.
Mortgage Schemes: A Mixed Bag
The government’s Freedom to Buy mortgage guarantee scheme, launched to support 95% mortgages, has made little impact. In fact, many lenders and developers, such as Berkeley with their Deposit Unlocked initiative, are already offering similar schemes. While such programs offer some relief, experts argue they aren’t a comprehensive solution for first-time buyers facing London’s steep prices.
Meanwhile, homeowners renting out rooms are calling for reforms to the Rent a Room scheme, which hasn’t seen updates since 2015. Many are pushing for an increase in the tax-free threshold from £7,500 to £10,000.
Can We Expect Government Support?
Reforms to the Lifetime ISA are also on the wish list for homeownership advocates, with many pushing for the removal of the withdrawal penalty for properties priced above £450,000. With this cap unchanged since 2017, it no longer reflects today’s housing market.
Despite these calls for action, experts like Franc Landa from Touchstone London remain skeptical of any major interventions. “I do not expect a rabbit out of the hat from the Government this time,” Franc says, highlighting the gap between political promises and practical solutions for those struggling to get on the property ladder.
Key Takeaways:
- Average deposit for first-time buyers in London: £142,588 (30% of property price).
- London vs. national property price difference: London properties are 85% higher, with the average price at £469,740 compared to £253,417 nationally.
- Market trends: House prices in London rose by 1.8% in September 2024.
- Potential policy changes: Possible reforms to Lifetime ISA and Rent a Room schemes may provide limited relief.