Prices for first-time buyers in London drop by £17,760

Why there’s fresh hope for those seeking to get on the ladder in the capital

The price of the average first-time buyer home in London has dropped by almost £18,000, according to new research from Rightmove.

Overall, property coming to the market in the capital now costs 1.7% (or £11,040) less than this time last year. It’s the largest year-on-year fall since the 3.5% seen in January of this year.

But the biggest drop has been for properties with two bedrooms or fewer, the sector where first-time buyers are most active, which recorded the largest percentage drop in new seller asking prices.

These properties now cost on average £486,371, down from £504,131 in 2017, a fall of £17,760.

End of the buy-to-let boom?

Experts say the price drop in the London’s so-called starter home sector is due to a collapse in the buy-to-let sector.

“Reduced competition for smaller properties from landlords compromised in particular by recent tax and regulatory changes is playing a part in the fall in the growth of house prices,” says Jeremy Leaf, a north London estate agent and a former Royal Institution of Chartered Surveyors (RICS) residential chairman.

The news of property price falls will offer fresh hope for would-be buyers in London who despair at house prices.

A recent study revealed that 47% of millennials have given up hope of ever owning their own home.

Miles Shipside, director and housing market analyst at Rightmove says: “The average fall of around £18,000 in the cheapest sector is a welcome benefit to affordability-stretched buyers.

“It’s hard to know if prices will fall back much further, when traditionally prices are weakest in the summer holiday period and the winter season.

“Buyers who miss the opportunity to source a good deal this summer might have to wait a few months for their next chance at a potential bargain.”

Cheapest areas to buy in London

Rightmove’s study revealed the cheapest average properties in London are in Barking and Dagenham where average asking prices are £318,264, Havering at £404,881, Bexley at £409,872, Newham at £414,324 and Croydon at £440,958.

Croydon remains good value in London for first-time buyers Croydon's transport links into the City of London and comparatively low prices make it attractive for first-time buyers. Photo: Victor Moussa/Shutterstock

There was good news from the Government last year which announced stamp duty would be abolished on first-time purchases up to the value of £300,000. It claimed this would help up to 80% of first-time buyers in London.

Under the new system, first-time buyers will pay only 5% on any proportion between £300,000 and £500,000.

However, any purchases above £500,000 will attract the normal stamp duty rates on the whole purchase price.

Buyers can also get help from the specific Help to Buy London scheme. It allows first-time buyers the opportunity to borrow up to 40% of the price of the London property that they wish to buy. There are no age restrictions and the loan is interest-free for the first five years.

However, even with these Government measures, the cheapest London properties are still too high for many.

The plight of first-time buyers struggling to get on the housing ladder has become more difficult with house prices rising and salaries failing to keep up with the pace.

It's tough at the top

The Rightmove report found that while starter home prices fell, the middle-market sector (all three-bedroomed, and four bedroom homes excluding those that are detached) saw an average rise of 0.2%, up from £706,805 to £708,019.

There was less good news for those who own a home in the top-of-the-ladder sector (four bedroom detached properties and all those with five bedrooms or more) with prices falling by 2.7%, down from £1,400,451 to £1,362,252.

Homes at the top end of the ladder have also seen a price drop in London Homes at the top end have also seen a tumble in prices. Photo: ZGPhotography/Shutterstock