Average Pay in London - Can They Afford the Flats We Bought?

Recall our investment strategy.  Buy flats that eventually we can sell to the man-in-the-street.  Alright, perhaps not the average British, but at least to an average person working in London earning a median or upper quartile salary.

If you search for "average UK salary", you will find quite a number of articles.   The figures I use in this analysis are largely from an aritcle by the Evening Standard here.

Salient figures:
Average gross annual salary of  work in the UK - £26,756 (2012)

Average gross annual salary of worker in London - £41,597 (2012)

Average City of London worker - £83,750 (2012)

The next question - how much can these people borrow to fund a property purchase?  The answer is that the UK banks currently lend 2.5X to 3X annual household income. This means that a worker earning £80,000
can borrow up to £240,000.

Oh, wait a second.  In that case, how are these people doing to afford properties that cost £400,000 or more?  

Definitely food for thought.

By now, the point I am trying to make must be obvious.  If your property is too expensive, the market for it would likely be small.  Of course, you may hope for some rich foreigner to purchase your £1,000,000 property.  That is definitely possible.

But we prefer to stick to the mass market as we feel more assured that there are many more people who want to buy these properties than are available.

Just go read about the chronic lack of supply in London.

Happy Investing!