The challenges facing a future first time buyer in London

What is considered affordable within London as well as whom it is affordable for is ambiguous. Buying in London is a problem in particular as house prices and living in London is considerably more expensive in comparison to the rest of the country; this makes coming up with a deposit for a house much harder. This is especially true for those that are also privately renting as money that could be used for savings is being spent. The government has introduced many schemes to help alleviate these issues that many young people face, however how far has this gone to solve those problems?

The London Living Rent is a scheme that was set up in 2017 to help alleviate the problem of renting while also having aspirations of buying your own property in London. The idea is to provide renters with lower than market rents to therefore have the opportunity to save. The scheme also allows those tenants to buy a share or the whole property at a later date. This is a greatly beneficial scheme for those who are able to utilize it and is a scheme I am actively looking at.

A problem with London Living Rent is that it is not widely available. Through my own research I have only found a small amount of properties that offer this scheme within London, of which were all for two bedroom properties. Personally this does not work as I am looking to get on to the property market as an individual; this may however improve as the years go by.

The shared ownership scheme allows the buyer to have ownership of a section of the property. Therefore, rather than paying for the whole mortgage an individual will pay for a percentage, normally between 25% and 75%. The remaining percentage is paid for with monthly rent; making property ownership more achievable for many people as the deposit needed is reduced to the amount you will own. This fixes the obstacle many first time buyers face with raising a big enough deposit.

While it has been set up to be affordable it has been proven to be far from it, in 2017 ‘Which?’ found that 76% of people aged under 30 would not pass the necessary affordability checks for the minimum share of a one bedroom or studio property within a 20 mile radius of central London using a 95% mortgage. This is a scary thought for me; in the future would I be sacrificing being close to friends and family for home ownership?

As a result of the expense associated with buying a shared ownership property the process of “stair-casing”, investing in a bigger percentage of your home, has been made an even harder task for shared ownership residents. This is counterproductive for a scheme that is designed to get more people on the property ladder. If it is made difficult for an individual to acquire more of their property, how helpful is this for new buyers?

The Help to Buy Scheme has been set up to reduce the deposit needed for a home with the idea of making houses more affordable with 5% deposits being available. Equity loans from the government are available for 20% of the purchase price outside of London and 40% of the property price has been available in London since February 2016. This is beneficial for first time buyers living in London as there is some consideration for the extra expenses associated with living in the city. This has been illustrated with 21,352 out of 27,041 completions in London have made use of the 40% equity loan since it has been made available. This is promising for young people looking to buy a house, as this dream can be made possible sooner than if you were to save for a larger deposit.

Although the Help to Buy Scheme allows a house to be purchased through an equity loan, this also presents problems. The amount an individual owes is not set in stone as the loan can go up and down depending on the value of the house. If the value goes up the homeowner has to pay more than was originally loaned to them. This could prove to be a barrier to home ownership as the additional costs could be viewed as too much for a first time buyer; even when using a government backed scheme that is designed to make the process easier.

Despite a multitude of schemes being accessible, the dream of owning a home within London and surrounding areas does seem like a pipe dream for many. If there are schemes set up with the ambition of helping people but it is not able to help the majority (shared ownership for those under 30 near London) you can argue that it is ineffective. However I would also argue that a solid start has been made and this can be built upon to improve property ownership going forward so in the future more can be done to help those wanting to get on the property ladder both in London and across the country.