The year is 1999. Fatboy Slim’s Praise You tops the charts, and the London Eye is being hoisted in position. Perhaps not so memorably, London property was affordable.
Back in 1999, the median London property was selling for £76,000 in today’s prices. With most mortgages lending at a maximum of 4.5 times your salary, you’d only need to earn slightly less than the median London salary, £22,000, to afford to buy a home.
Since then, prices have more than quadrupled, and the median property will set you back an eyewatering £500,000. That's good news for anyone who bought in 1999, as they'll receive a high return on their investment.
For anyone not already on the property ladder, though, that first rung is now much further away. The problem is that, while house prices have increased in the capital, incomes haven’t kept up. If you’re earning the median London salary, about £40,000, you simply won’t qualify for a mortgage on the median home.
Many Londoners, including this author, who was only two years old in 1999, lacked the foresight to invest when prices were low.
And it’s not just the average property that’s out of reach for Londoners. A City Post analysis has found that most of the very cheapest houses across London- those in the bottom 10 per cent of value – were not affordable on the median London salary.
Even for those earning in the top 25 per cent, most areas of the city remain out of reach. Whereas before, an average earner could buy an average property, now, a top earner can't even buy the cheapest property.
So where did it all go wrong? Professor Josh Ryan Collins, author of Why You Can’t Afford a Home, says finance has become “addicted to property”. He argues that the growth of mortgage credit since the 1980s has led to more and more people buying housing as a speculative investment, rather than a human need.
According to Ryan-Collins, until we stop prizing homeownership, house prices will continue to grow. The "culture of home ownership,” he says, is partly to blame.
But many young renters aren’t keen to rent indefinitely. “Unlike in Germany, where you can rent forever, in the UK, financial security means having a home,” says Estelle Pack, 22. “When you’re renting, it feels unsafe because the landlord can just decide to sell up and evict you.”
“It feels like you’re throwing your money away because you’re not getting anything out of it. You can’t even nail a picture to the walls!”
On the City Post findings: “It was quite scary,” Pack says, “I know it’s difficult to buy a home, but I had no idea how bad it could be.”
“Because I work in finance, I’m in the privileged position of being able, at some point, to take out a mortgage. But unless you’re on that sort of salary path, I just don’t see how you can afford to buy.”
Though she has been advised to think of moving out of the capital, Pack is not convinced. “I think it’s terrible to say you have to go somewhere else instead,” she says. “To work in certain sectors, you really don’t have a choice but to live in London. If you tell people to move out, you’re basically saying you can’t get those jobs.”
Daniel Bennett, 23, was eager to get on the property ladder as soon as possible. “I try and invest most of my savings and historically property has been a good investment,” says Bennet. He bought a property in Zone 4 last year with a friend.
Bennett and his flatmate could buy a flat with a loan from the Help to Buy scheme. The scheme offers 40 per cent loans for first-time buyers of new build properties. Though buying a property with a friend can be risky, Bennett says more people should consider it.
“At our age I think [buying property] is only accessible if it’s with someone else. My flatmate and I don’t have exceptional salaries – buying a house became affordable just because we’ve paired up and got the government loan. If I were buying on my own, nothing would be affordable.” Bennett encourages aspiring buyers to “look into all their options” before writing off London.
In the meantime, I hear the Heathrow Villages, one of the few green areas on the map, are very quiet this time of year.
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