Clients looking to buy properties in London will need salaries of at least £100,000 if they are going it alone, estate agents and advisers have claimed.
Director of estate agent Benham and Reeves, Marc von Grundherr, said: "Unless you’re earning close to six figures, the prospects of purchasing a property alone are virtually impossible."
Even high-net-worth individuals need to score large salaries to buy in more expensive areas. According to John Charcol's head of marketing Nicholas Mendes, the prime London property market is a "completely different animal" in terms of expense.
Mendes said: "The prime London market is a completely different animal in this respect and you really do have to be earning tremendous sums to be house-hunting in the likes of Mayfair and Knightsbridge."
Their comments followed research by Benham & Reeves, which found that at the higher end of the market, homebuyers in London would need an average income of £776,314 for a mortgage, 7.9 times that of the average buyer.
But even with the average London home priced at £523,376, buyers would need an income of £98,860 to qualify for a mortgage - putting most properties out of the reach of many individuals.
Benham and Reeves analysed market values across 28 prime areas, revealing significant income requirements for high-end property buyers (see table, below).
According to the research, to qualify for a mortgage at 4.5 times their income, buyers would need to place a 15 per cent deposit.
For the average London home valued at £523,376, this would mean saving £78,506 and earning £98,860. However, in prime locations like Mayfair, Knightsbridge, and Belgravia, the required incomes are substantially higher.
Table: Income to prime London house price ratio
Location | Average Home Price | Income Required |
Mayfair | £4.1m | £776,314 |
Knightsbridge | £3.5m | £629,841 |
Belgravia | £3.1m | £561,353 |
Canary Wharf | £534,977 | £101,051 |
As a result, Benham & Reeves noted a slight slowdown in property purchases in the capital.
Von Grundherr said: "It’s fair to say that the London market has been hit hardest by a reduction in market activity as a result of higher interest rates, with buyers simply not able to stretch as far as they usually may have due to the higher cost of borrowing."
Martin Stewart, founder of London Money, agreed with von Grundherr, saying: "The market has most definitely slowed down".
He told FT Adviser: "The timing of the general election was bad for housing.
"It took six weeks out of what would normally be a busy time for the sector which, coupled with a summer of sport and closely followed by the school holidays, made for a quiet environment. Affordability is very much an issue."
He added: “The costs of living crisis doesn’t get talked about as much these days but it is still very much there and if inflation is 2 per cent, then I’d like to show the ONS my bank statements.”
Advising HNWs
However, Mendes said advisers of high net-worth clients were able to draw on a wider pool of financial resources to help clients purchase prime properties.
