British Property Award Winner 2017 & 2018
London’s housing market is unique as
at 50%, the level of home ownership is the lowest in the UK, yet because the
city is so large it has nevertheless accounted for 28% of the value of all
first time buyer lending in
the UK over the last year.
First time buyers in London put down
larger deposits than in other parts of the UK despite higher house prices and
tougher affordability criteria. They bought properties with an average loan to
value (LTV) ratio of 75%, a figure unchanged since the third quarter of 2008,
and less than in the rest of the UK at 80%.
While it may seem counter intuitive
that London’s first time buyers put down larger deposits when house prices are
higher and affordability more constrained, the characteristics of London’s
first time buyers differ from the UK average in several key areas.
First time buyers are older in London
with an average age of 31 compared to the rest of the UK at 29. This means they
have more time to build savings and achieve higher paying employment.
Parental assistance is greater in
London. Recent estimates indicate that only 28% of first time buyers in London
bought unassisted, compared to 34% in the UK overall.
Also their incomes are higher. The
average first time buyer household in London had an income of £50,000 compared
to £34,000 in the UK overall. They borrowed an average of 3.5 times their
income with mortgage payments
typically consuming 21.3%, compared to figures in the rest of the UK where the
average income multiple amounted to 3.25 and 20.1% of income was taken by
First time buyers in London make up a
larger proportion of the total mortgage market
at around 50% compared to around 40% in the UK overall, reflecting demographics
in London where there tend to be more young people of a typical first
time buyer age.
Loans for house purchase in London
increased in the third quarter, as in the rest of the UK. A total of 20,600
house purchase loans worth
£5,070 million were advanced in London, up by 22% compared to the second
quarter and a 4% increase compared to the same period last year.
This rate of growth compared
favourably to the UK overall, where house purchase lending increased by 13% on
the second quarter. The total value of loans for
house purchase marked the highest figure since the last quarter of 2007.
Contributing to the increase in house
purchase lending, lending to home movers rose by 18% compared to the second
quarter. A total of 10,500 loans worth £2,950 million were advanced to home
movers in London, slightly lower than the 10,600 loans taken
out in the third quarter of 2011.
The LTV ratio for home movers fell in the
third quarter and at 66% it is now at the same level as the first quarter of
As in the UK overall, remortgage
lending in London was weaker in the third quarter compared to both the previous
quarter and the same quarter last year. A total of £2,050 million was advanced
to borrowers remortgaging
in the third quarter, down from £2,120 million in the second quarter, and a 16%
fall compared to this time last year.
‘The London housing market faces
similar issues to the rest of the UK in terms of a lack of supply and
affordability, yet different demographics, population flows and tenure patterns
mean that it is also unique,’ said CML director general Paul Smee.
'With the Mayor now directly
responsible for housing strategy and investment in London, we look forward to
seeing his finalised London Housing Strategy. Lenders want to be recognised as
part of the solution and we will work constructively with the government and
the GLA on deliverable solutions to London’s housing challenges,’ he added.
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