Why First Time Buyers find it hard to buy in London
- High Prices
- Shortage of Properties
- Difficult lending
- SOLUTION – Sell council properties in Zone 1 & 2
This article discusses the various issues in the London housing market, addressing high property prices, housing shortages and high rentals. Linking these factors to the reasons why first time buyers are facing an uphill struggle.
I have lived in London my whole life and professionally work in the property industry with my company PropVestment. The aim is to provide information, analysis and property related services for investors. From my experiences in this field and from living in London my whole I make some observations.
First Time Buyers Problem:
Too high prices and shortage of properties
The first thing that caught my eye this week was an article titled “London councils breaking B&B stay limit for families” on the BBC News website. The main thing I understood from this article is that Westminster council has broken the law by not housing 134 families into housing and not B&Bs within 6 weeks. The main take on the article as reported is housing shortage.
However, why are there so many demanding housing in Westminster, arguable the most expensive borough. Surely if you are in need of accommodation you should take or be given where available and not be given location preferences.
Further I understand people seeking council housing in many cases never intended things this way, however in places where there is no council housing they fit into, why can’t they share with family or friends in whichever location is available, at least in the short term. When it comes to children, surely parents should have more responsibility before bringing a child into this world that there will be some sort of roof available and should the worst happen a “plan b” that does not rely on the state.
It is also the fact that in London we have highest number of asylum seekers, now I understand that most have very genuine reasons to be here. But if they have traveled thousands of miles to get to London, surely housing them a dozen miles outside London where B&B rates and property rentals are significantly cheaper makes sense. We the British taxpayers are paying too much unnecessarily, councils and the law makers need to wise up.
Link back to the original discussion about the first time buyer situation. As discussed in a previous article that appeared in the Telegraph, that there is £4.5Bn locked up in council properties. Ex-council properties represent a great proposition for first time buyers, I have benefited personally from this. However there are not enough on the market.
There is so much housing stock locked into the council both as held properties and rentals that there is a massive shortage. This shortage and high prices and rents is holding first time buyers out of the market.
If councils sold their properties in Zone 1 and 2, where you only have to walk around and see the vast council blocks. These properties are valued at multiples of the national average for similar properties, therefore the funds can provide the same multiples of housing if utilised in other parts of the country. This will solve the council housing shortage, no more use of B&Bs will be needed, saving the British taxpayer millions.
In addition this will increase supply of properties in London, so naturally prices will drop and become much more affordable for first time buyers.
Another article that caught my eye this week was in the Guardian, about the Packington Estate in Islington where council tenants are only charged as low as 25 % of the market rent. Directly opposite private tenants pay the full rate. I understand the part of integrating society however this is unfair on business owners and will damage the economy.
The rents in an area are governed by market conditions, business owners pay full rents and this should represent the kind of business generated by the local population. If the people living in an area are not of the spending power of what is expected or represented in rents, how can businesses make money. Will someone paying 25% market rent generally go for a gourmet meal in the local bistro or visit the swanky wine bar?
Businesses suffer, pay less tax, extreme cases close down. London economy suffers.
Further paying marginal rents will result in a rise in illegal subletting at nearer market rents and so the council will be subsiding illegal businesses and cheat effectively.
Solution to help First Time Buyers:
– Sell of council properties, use funds to provide housing for many more outside zone 1
– Create supply for first time buyers to buy
PropVestment is here to help guide all first time buyers getting on the property ladder, we want changes in laws and we can more directly assist in best practises too.