Skip to content

Substantial equity needed to buy bigger at all stages of property ladder

An analysis of asking prices in 65 commuter towns circling the M25 in England by property consultants Savills shows that Clacton-on-Sea, Margate and Basildon have the most accessible property ladders whereas Hove, Reigate and Maidenhead are the least accessible.

For each location it considered the average price of a one bedroom flat at the bottom of the property ladder and the proportionate increase in the cost of a four bedroom house at the top and then ranked the locations by relative accessibility to both first time buyers and those seeking to work their way up the housing ladder.

Analysts found that while there is a strong correlation between the price of entry to the market in the different locations and the ease of moving up the ladder, the link is not linear. Much depends on a town's housing stock, local employment, commuter time to London, amenities, etc, which all impact on values at each stage on the ladder.

'Many aspiring home owners are faced with the difficulty of getting onto the property ladder but our analysis shows that the challenges continue up the ladder and require high levels of accumulated equity at each stage,' said Lucian Cook, director of Savills Research.

'Far the hardest jump is from a three to a four bedroom property, which requires a 60% increase in spend,' he added.

Currently, the average price of a one bed flat in this South East commuter belt is £121,265, while a four bed house is £391,212, a 3.2 fold jump. On average each move up the housing ladder requires a home mover to buy a property worth 50% more than their existing property.

'Those buyers with limited amounts of equity or cash, but an overriding need to move for more space, are having to look beyond their first choice location in search of value,' explained Cook. After costs of moving, a home owner will need to have retained at least 40% equity in their existing property in order to secure a 75% loan to value mortgage on their new home, the minimum required for a favourable rate.

Related