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'Stupidly' expensive London homes frustrate would-be buyers

The median house price in London was £419,650 in October, about 12 per cent more than a year earlier.

Sue Roy, a 37-year-old accountant from the London suburb of Upminster, moved back in with her parents to save for a down payment after finding herself unable to afford a home in the UK capital.
"It's stupidly expensive and unbelievable that even professionals like me are getting priced out of the market," said Roy, who had been renting an apartment for £1,200 ($1,800) a month. "I wanted to stay in King's Cross because it's just down the road from work, but I couldn't afford to buy."
The median house price in London was £419,650 in October, about 12 per cent more than a year earlier, according to an analysis of Land Registry data by Bloomberg.
The surge in values prompted the UK government to announce measures this week to aid first-time buyers in the capital, such as offering Londoners interest-free loans worth 40 per cent of the value of a newly built home as part of a programme known as Help to Buy.
"Demand for home ownership is high, but affordability continues to be a problem for many," Jeremy Leaf, former chairman of the Royal Institution of Chartered Surveyors, said. "Any measures which help first-time buyers are good for the whole housing market and the London Help-to-Buy scheme will be helpful."
Surging labour and material costs may make it difficult for homebuilders to increase their output, said Mark Farmer, head of UK development at consulting firm Arcadis. "The unprecedented level of construction-cost inflation in the last 18 months is now leading many developers that have not yet committed to start building, to question whether their schemes are still viable," he said.
The government's moves to make more homes affordable for first-time purchasers came after the average income of the buyer of a home in London surged to a record in the third quarter, according to data compiled by the Office for National Statistics. Buyers earned a record £104,000 a year, £6,000 more than in the previous three months, and typically borrow an average of £340,000, the data show.
"It's just hard to believe that at 37 I'm back living with my parents," said Roy, who now spends 90 minutes commuting to and from her office. "Time is ticking and I really want to get on the property ladder."
Luxury homes fall 1.5%
Home values in London's best districts, meanwhile, fell 1.5 per cent to about £880,600 in October from a year earlier, according to an analysis of Land Registry data by Bloomberg.
Sales of luxury homes have slumped since Chancellor of the Exchequer George Osborne increased the stamp duty transaction tax to as 12 per cent for the most expensive properties in December.
He will also raise the tax applied to landlords and second-home owners by three percentage points from April.
"The biggest impact has been felt on homes in the £1.5 to £2 million bracket as buyers of these are not oligarchs or foreign billionaires who can afford to pay more in tax," said Howard Archer, chief European economist at IHS Global Insight in London. For them, "the increase in stamp duty does make a notable difference".
Demand for London mansions has also been hit by the 26 per cent decline in the value of the Russian rouble, the slump in oil prices and lending restrictions in countries such as Singapore.
Just 313 homes sold for more than £1.5 million in London in August, a 30 per cent decline from a year earlier, the latest Land Registry data shows.
Russian buyers acquired 4.2 per cent of homes sold in central London's best districts in the third quarter, compared with 10 per cent a year earlier, according to broker Knight Frank.
Demand from Singapore has slumped after the government capped borrowers' total debt repayments and Brent crude has fallen by more than 20 per cent, reducing interest from the Middle East and Malaysia. - Bloomberg