Table of Contents
- How to Buy Cheap Houses in London
- Reconsider the areas of London where you want to buy property
- Reconsider the type of property you want to buy
- Buying a cheap or badly maintained property
- Tips when buying a cheap rundown property in London
- Cheap Houses in London FAQ
- Government schemes for London home buyers
- Help to Buy London
- Rent to Buy in London
- Starters Homes Initiative
How to Buy Cheap Houses in London
With the average price of houses in London easily surpassing £600,000, it can be quite difficult to find cheap houses in London for sale. This is especially problematic for first-time buyers and those not working in a lucrative profession.
In this article, we consider ways to find affordable houses in London and nearby areas. We start by explaining how reconsidering the type of home/area you wish to live in as well as its condition can give you access to cheap houses in London. In the second part of the article, we look at all the government initiatives which can help prospective home-buyers get a foot on the property ladder by reducing the price they pay.
Reconsider the areas of London where you want to buy property
Although you might dream of living in an affluent area like Chelsea, there are very few – if any – cheap properties for sale in this borough. When house-hunting in London, you must be realistic and be prepared to look at less prestigious addresses. One of your most important criteria should be close access to a bus stop and tube/train station. With the extensive public transport system in London, you will therefore never be far from where you want to go.
As you travel further afield and into the Greater London area, you will find that property prices become lower and lower. Some areas, like Bexley and Croydon, have houses for sale which are half the price of similar properties located in central London.
Another way to find cheap houses in London is to do your research. Find out which areas of the capital have rejuvenation schemes in the pipeline. If you buy a house in an unpopular area before the property developers move in, you will be able to pick up a bargain. A prime example is that of Barking and Dagenham. This area has always had the reputation of being a working-class borough, but ongoing developments mean that the character of the area will change drastically in the coming decade, accompanied by rising house prices.
Having a good look at the various property auctions in London is also an excellent way of saving money and finding a cheap house in London, but this does not always work as property auctions can get out of hand with bidding wars and the final price often greatly exceeds the guide price shown in the auction guide.
Reconsider the type of property you want to buy
Although you may wish to buy a semi-detached house with a specious garden, you will have to be realistic about the type of property you can afford. A terraced house or a flat might be a more affordable choice if you are on the lookout for cheap property in London.
Once you have got your foot on the property ladder and built up some equity in your property, you will be able to afford something better next time.
Buying a cheap or badly maintained property
As well as the location and type, the condition of a property also determines how much it can be sold for. If you have the time, practical and organisational skills and the budget, you can find a wide variety of cheap houses in London which need work.
The advantage of buying a run-down, neglected cheap house in London is that there is less competition so you might be able to get a further discount. Another benefit is that you can put your own stamp on the property as you are doing it up so that your new home reflects your personality, personal preferences and circumstances.
There are, however, disadvantages of buying a rundown property. One is that you need to ensure that a thorough survey is carried out to pinpoint any major structural issues which may be costly to fix.
Another drawback concerns your mortgage provider. You may find that a mainstream lender will refuse your mortgage application if the property is considered to be uninhabitable. For example, the bathroom facilities do not work.
Finally, doing up a poorly maintained property can take a long time. You may even have to temporarily rent a house elsewhere while repairs are being done. This can be an additional burden for you financially.
Tips when buying a cheap rundown property in London
1. Budgeting for your property purchase
Before you even consider buying a rundown property, you should factor in all the costs. Even if you are planning to do the majority of the work yourself or with the help of family or friends, you still need to consider the additional costs such as materials, extra insurance, the hire of professionals or specialised equipment and possible alternative accommodation if the house is uninhabitable. Once you have a budget in place, you should stick to it as closely as possible, always giving yourself leeway of 15%-20% extra for mishaps or unforeseen expenses.
2. Designing the property renovation
It can save you a lot of time, hassle and money if you consult a professional such as a structural engineer or architectural designer before starting to do up the property. They will be able to advise you on issues such as whether changes are feasible and what order they should be done in.
3. Timetable your property renovation work
Your budget should be accompanied by a timetable of how long you expect each stage of the renovation work to take. Keeping to this timetable means that you will be able to hire any professionals only for the time necessary to do their job and can ensure that you can move into the property as quickly as possible. Remember that if you have bought the property with a mortgage, your repayments are still due even if you have not yet moved in.
Cheap Houses in London FAQ
What are the cheapest London boroughs to buy property?
Some of the cheapest London boroughs to buy a home are Barking and Dagenham (average price of £297,000), Newham (£321,000), Bexley (£356,000), Croydon (£353,000), Goodmayes (£360,000) and Mitcham (£394,000). In general, the further you go out from the centre of London, the cheaper properties are with the cheapest properties being on the outskirts, bordering neighbouring counties like Essex. When house-hunting, you could also look at traditionally working-class areas like Tower Hamlets as you might be able to find cheap properties there as well.
How can I find a cheap rundown property in London?
Buying a property at auction or buying a repossessed property are both good ways of picking up a bargain-priced rundown property. Estate agents are another source of badly maintained properties. You may find that such properties do not feature prominently in the marketing materials of estate agents so you may have to pay them a visit in person or go through their entire site. Online property portals allow you to narrow down your search by using the parameters on their search tool or there are also websites that specialise in rundown properties for sale. Going through the local press for details of probate properties can be a source of cheap properties because those inheriting are often eager to make a quick sale.
What is the First Dibs for Londoners scheme?
First proposed by London’s Mayor, Sadiq Khan, the First Dibs for Londoners is a scheme to make cheaper housing available for those who live or work in the London area. At the moment, this scheme is purely voluntary and was started when it was discovered that the vast majority of overseas buyers of London property buy houses which are worth under £350,000. As the name suggests, the scheme asks property developers to allow Londoners to be given the chance to purchase the property first before foreign buyers/investors. To do so, they are asked to wait 3 months before marketing it to foreigners.
Government schemes for London home buyers
There are a number of government schemes which can help reduce the price you buy for your house and give you access to cheap property. All of these initiatives have strict eligibility criteria – for the home buyer as well as the property itself.
Let’s look at what is available in the London property market. These schemes might differ from similar schemes in the rest of the UK to reflect the fact that the capital has the most expensive house prices in the country.
Many London boroughs run a shared property ownership scheme where you buy a certain percentage of the property (usually 25%-75%) and rent the remainder. Some schemes also offer you the opportunity to staircase, which means to increase your share of the property in stages as you pay off more of the loan or earn more money.
The main drawbacks of shared ownership are:
- You are restricted in the areas where the shared ownership scheme is available
- It is highly competitive so housing associations may make the eligibility criteria stricter
- It can be difficult to resell a shared ownership property
Help to Buy London
Available exclusively for first-time buyers, Help to Buy London gives an equity loan of up to 40% of the property price for the purchase of new-build properties in the Greater London area. This scheme is only available for properties worth up to £600,000 and for would-be buyers who have saved a deposit of at least 5%.
The first five years of this equity loan are interest-free. After this period elapses, the loan must be repaid in monthly instalments with an administrative fee of 1.75%. Full repayment of the loan must be made when the property is sold, when the mortgage ends or after 25 years (whichever comes first).
Rent to Buy in London
The Rent to Buy scheme enables prospective home buyers to rent a house at 20% below market value for a term of 5 years. At the end of this period, they are given the opportunity to buy all or a percentage of the property as part of a shared ownership scheme.
The eligibility criteria of Rent to Buy in London are:
- First-time buyers only
- Household income of under £64,000
- Possess a good credit history
Starters Homes Initiative
Although the Starters Homes Initiative was announced in 2014, no properties have been built yet. This scheme is intended to help first-time buyers aged 23-40 and who have a household income of under £90,000. The discount that is available is up to 20% off the house price, making cheap houses in London a little more within reach.
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