London property squeeze tightens

The full extent of the squeeze on first-time property buyers in London is exposed in a new report.

The number of city boroughs where the average price of a two-bedroom flat is under £250,000 will fall from 15 to four in the next five years, it says.

Property services company Hamptons International expects prices in Greater London to rise nine per cent this year — then a further seven per cent next year, six in 2015, four in 2016 and 4.5 in both 2017 and 2018.

Central and Inner London prices are growing faster and will continue to leave the suburbs behind, although the gap will narrow after 2016.

The report concludes that while Londoners in the key buying age groups can today afford to buy a two-bedroom property in almost half the city’s boroughs, by 2018 only a third of the areas will still be within their reach.

Fionnuala Earley, research director at Hamptons, said: “Affordability is always tough for buyers in London and it’s not great that this will deteriorate in the years ahead. But the good news is that it’s not as bad as one might have expected. Even if prices rise by 28 per cent over the period, as we expect, there will still be 13 out of 33 boroughs that will be affordable.

“Even though those boroughs may be less popular now, it’s not unreasonable to expect that new demand will breathe new life into them.”

The report reveals that by 2018 the average cost of stamp duty in Kensington and Chelsea will be almost £60,000, compared with under £40,000 now.

Boroughs where the average stamp duty will rise above £20,000 by 2018 include Westminster, Camden, Hammersmith & Fulham, Wandsworth, Islington and Richmond.

Osteopath Amy Hope, 25, who is setting up her own practice in Clapham and London Bridge, said the findings were “not surprising” but feared she may be forced to move out of London to afford the flat she wants.

Miss Hope, who pays £650 a month to rent in Clapham with friends, added: “I’d be looking to get a two-bedroom flat because it’s a better investment and most people would like to rent out that second room if they can.

“I’m keeping my savings and hoping things will settle down and make it a bit easier to get on to the ladder. I’m thinking of probably having to relocate up north if I want to buy a house.