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How to buy a house on a tight budget in London?

London, despite being one of the most expensive cities in the world to live in, still attracts thousands of people looking to move and settle in the capital every year. According to The Week, the average Greater London property asking price was £638,826, while Inner London prices were £792,140. It might sound impossible to own a house in London with a tight budget, but the good news is that some London boroughs are more affordable than the rest of the capital. You can find flats and houses that are priced as low as other cities in the UK, perfect for first-time buyers and young professionals. To get your foot on the London property ladder, you should consider various aspects such as areas with low priced properties, and that other regions might be more suitable for first-time buyers or affordable in making a property investment with a smaller budget.  

Budgeting

Before you start searching for affordable areas, the first step is to set a budget and consider the type of houses you want to buy or live in. Generally, leasehold flats are less expensive than freehold houses that are similar in size and location. Although leasehold properties are not as flexible as freehold properties, i.e. the landlord (freeholder) may have a lot of restrictions apply to the property but they are way more suitable for someone with a tight budget. To learn more about the difference between leasehold and freehold property, please visit our blog ‘Freehold or leasehold for investment?’ 

Affordable Housing Schemes

You may also find cheaper options by looking into the government’s affordable housing ownership schemes – help-to-buy scheme and shared ownership scheme. Help-to-buy is a scheme designed to help first time buyers who plan to purchase a new build. This scheme allows you to borrow an equity loan from the government for up to 40% of the purchase price and only pay 5% upfront when purchasing. Any first-time buyer is eligible for this scheme when purchasing a new build-up to £600,000 and must be for their own use, i.e. not being sub-let or rented out after buying it. Compared to mortgages from banks, help-to-buy equity loans provide more room for freedom – no equity loan fee (interest) needs to be paid for the first five years. After five years, you will be charged a fee of 1.75% of the loan’s value and the rate increases every year by 1%. 

If you are more interested in second-hand houses than new builds, shared ownership might be more suitable for you. Shared ownership is when you share the ownership of a property with someone else or a housing association. It is designed to make it easier for people on lower incomes with smaller property deposits to get onto the property ladder. Compared to the help-to-buy scheme, shared ownership properties are much cheaper since you can buy a share of the property between 25% to 75% and pay rent to the other shareowner. This scheme applies to a broader range of the public – anyone who has an income of less than £90,000 a year. They can be a first-time buyer, an existing shared-owner or someone who used to own a property but cannot afford to buy one now. The property ownership can be shared between four people max, which is ideal for people who are fresh out of school and planning to share a house with others. And because shared ownership properties are always leasehold, you can choose to sell your shares or buy more shares after the contract ends, when you own 100% of the share, you become the property owner.

Now you have an idea of what to look for when searching for properties, it’s time to narrow down your searches to specific areas in London where this is possible. Below, we have outlined a selection of interesting areas that provide value for money for those on a tighter budget.

Croydon, a London borough with low prices and a range of amenities for the local community, perfectly satisfies the needs of people with tight budgets.  It is an ideal area for first-time buyers and with convenient public transport to Central London and being one of the most affordable areas of London, Croydon is gaining in popularity.

Hounslow offers a wide variety of different types of properties, such as leasehold flats or shared ownership properties. It is a paradise for first-time buyers with many newly established developments and excellent links for commuting, Hounslow becomes an increasingly popular choice for first-time buyers. 

Balham is another popular hotspot to live in zone 3, perfect for both families and professionals. A large proportion of properties are from the Victorian and Edwardian era and provide a wide range of options for period-home-lovers. Most of Balham falls within Wandsworth where council tax is lower than many other local authorities in zone 3. Apart from low council tax rate, many families are attracted to Balham for the some excellent schools in the area, both state and independent schools, for example, Emanuel School and Bishop Thomas Grant Catholic School.

Chislehurst is located in zone 4 of London, a quiet conservation area known for its Victorian period cottages and mock Tudor homes built in the 1930s. This aesthetic area is filled with green space, very suitable for older generations to live and many attractions such as ancient Chistlehurst caves are a great day out for all the family. With relatively low house price and excellent environment, Chislehurst is only 20 minutes away from the London Bridge Station, and has high accessibility to Central London. When searching for areas to live in on a budget, you should avoid any boroughs in zone 1 and other more expensive areas such as Kensington, Chelsea, Mayfair and Westminster. With six zones across London and many nice neighbourhoods with green spaces, good schools and affordable housing, always be sure to run a search using our smart property search platform to find houses within your budget that cater to your lifestyle needs.

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