A common question asked by those looking to buy a property is: how much can I afford? Everybody wants to get good value for money and most stretch their budget as far as possible to land their dream home. Just how far your budget can stretch depends on the area you’re looking to buy, and – particularly in London – prices can vary massively.
There are many factors to consider when deciding how much you can afford, beyond simply the asking price of a property. In this article, we’ll discuss our specialist locations of Richmond, Barnes, and Putney, in South-West London using real-world data.
Decide your budget
Before making any enquiries into properties that you’d like to buy, it’s wise to establish your budget. Doing so will help to steer your search towards a clear vision of the feasible options available to you. The contributing factors can be broken into two categories: directly financial and indirectly financial.
Directly financial considerations
These include your monthly post-tax income and how much you can afford to pay each month for your mortgage. Generally speaking, most mortgage experts advise your mortgage repayments make up no more than approximately 30% of your post-tax income. Those who pay more are considered “cost-burdened” and potentially at risk of struggling to meet all other necessary purchases, such as food, transport costs, medical care, clothing, and so on. Those whose mortgage repayments make up 50% of their post-tax income are considered “severely cost-burdened”, and their risk of the above is significantly higher.
The next step is to accurately add up all of your typical monthly expenditures. These include the necessities mentioned previously, such as food, transport, and medical care, as well as household bills and even any savings you decide to make. In doing so, you’ll be able to calculate your maximum mortgage repayment threshold which will guide you in your property search.
Indirectly financial considerations
The other factors, which we’ve labelled as “indirectly financial”, contribute to your future financial circumstances without being explicitly cash-related. For instance, how secure is your employment situation? Is the company you work for stable and are your chances of a promotion reasonably high? Further, do you have any safety nets in place? Either in the form of savings or familial support? Having a safety net, while a last resort, will help to ensure that your property purchase isn’t an unnecessarily risky endeavour.
Additionally, your credit score is an important factor. Not only does your credit score inform your chances of being accepted for a mortgage loan in the first place, a good credit score can also contribute to you receiving a more favourable interest rate. Use a free credit score checker online to see how you’re likely to fair when securing a mortgage. Following these steps will help you to work out how much property you can afford.
What can I buy? And where?
Once you’ve arrived at your budget, the next step is to assess where this will bring you to in certain areas of London. You’ll find that different areas offer very different properties at each price point. For reference, the average selling price of a property in Greater London in 2019 was £490,944 but there were many sold well below and significantly higher than this, depending on property type and neighbourhood.
Flats and apartments
Thinking of accommodation in the South-West may evoke images of town houses and elegant suburban abodes, but it’s also excellent for buying flats and apartments too. In fact, it’s possible to find apartments here which are more affordable than the average property in London! In Putney in particular, the average apartment sold for £441,091 – almost £50,000 less than the aforementioned average. Proof that you can enjoy a slice of London living in a fantastic area without breaking the bank.
If you’re set on buying a house (instead of a flat or apartment), then terraced houses provide the most affordable option. Terraced houses also offer better insulation, making them very cosy even in the height of winter. Despite being the competitively-priced type of house, terraced houses in the South-West of London can be considerably more expensive than the rest of London on average. The average terraced house in Putney sells for £914,628.
With a semi-detached house, you enjoy a pleasant compromise of privacy and relative affordability. Depending on how neighbourly you are, having just one neighbour may be a huge plus or an unfortunate sacrifice! In the South-West, you can expect to pay anywhere between an average of £1,169,902 in Putney and £1,770,697 in Barnes.
Detached houses offer more privacy and often larger gardens both at the front and back, often with a driveway, and as a result, they demand a higher asking price. For example, in Richmond, the average detached house sold for £2,128,268 in the past 12 months. In Barnes, you can expect to pay approximately £2,200,063. Detached houses are a serious investment, but they offer an unrivalled living experience. It’s worth noting that the absence of immediate neighbours and the generous garden size aren’t the only factors which affect house prices; read about some of the strangest indicators of property value here.
For more guides to property and insights from expert estate agents, head over to our blog. Here at James Anderson, we pride ourselves on catering to your particular property needs and finding the right home for you. If you have questions and would like a more personal touch, then please don’t hesitate to get in touch with our friendly team on 020 8876 7222.