There’s always a sweet spot. The packet of crisps that hit the spot at 3pm. The dirty kebab at 4am after a night of raving. The moment when you and your best friend say the same thing at the same time.
Just like that, there is a sweet spot in the London property market. As a 28 year old with a boring ass job and typical party weekends with the occasional dinners and catchup with friends — I’m real. And I will not be able to afford anything on Mayfair. Hell, I can barely afford on Old Kent Road! But being realistic, if you’re like me, you should (hopefully) have some sort of savings unless you have squandered it away in travelling or recreational “fun”.
The sweet spot in London is £300–£350k.
- At a salary of £45k and above, this price point is not ridiculously unreachable. If you’re earning less than this which is very possible in London, then we need another lesson on how to reassess our life situation and figure out how to save or gather funds from others to achieve your goal!
- Assume 15-20% deposit in savings £60–£70k to cover your stamp duty as well. Or if not, that’s something for you to work towards as mentioned above and we shall address in another post to come.
- Mortgage amount would be £782 to £896 per month at 1.89% (correct as at Jan 16 from high st banks). Add service charge of about £100–120. That price range can get you a 1 or even 2/3 council flat within Zone 2 London. If you look hard enough even Zone 1 London. My friend just bought a newbuild in Limehouse £355k. She choose a higher rate to lock it in for longer so her repayments + service charge are just over £1000 but when she rents it out, she’ll rake in at least £1300. That additional income will only help you save faster and faster for the next property!
Why is this the sweet spot? It’s already hard enough to find anything decent in Zone 1/2 for less than £400k but when you do it’s probably more east or more west. The areas there then tend to rent for lower. Once you get out of Old St/Earls court, the rental goes to a much more affordable rate e.g. £1300-£1600 whilst still being within Zone 2. In these areas, you can also still find properties around £350k — winner winner chicken dinner. Otherwise you’ll be buying a 1/2 bed for £450k-500k, 20% deposit of £90k-110k to include stamp duty, £1172 — £1300 repayments with £1600 — £1900 rental BUT. That deposit is a lot. Even I can’t save that much. But if you can, then hells yea go for it! Because Zone 1 will always grow faster than Zone 2! But the opportunity cost must also be considered — can you spent that extra deposit on other investments to diversify? Do you even want to diversify? What else are you interested in?
Anything above the sweet spot would be that extra mince pie you didn’t need to eat over Xmas. That’s driven by emotion and desire to live in or specifically buy a property or in a specific area. These I cannot control and you can’t put a number on happiness and love. If you have the funds, go forth and even buy in Mayfair if that’s what your heart really wants! But with no emotional attachment and £££££ as the end goal, the sweet spot is where it’s at!
London house prices within Zone 2 also grow between 9–35%. Yes the range is that big. Why? All because of those damn hipsters wanting to move to N1 and Shoreditch. It’s bad because a real dump in Shoreditch will cost you an arm and a leg now but once you’ve bought said dump, it’ll be a money making machine! Embrace the hipsters I say! :)
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