Key facts
- Frozen tax bands and thresholds have significantly increased the cost of homeownership for London first-time buyers.
- The average London home now represents 14.7 times average earnings after accounting for stamp duty, national insurance, and income tax.
- Most London homes now exceed the £500,000 cap for first-time buyer stamp duty relief, resulting in an average tax payment of £16,350.
- Buying a typical London home requires approximately £70,000 in up-front cash.
- New private-sector residential home construction in London has fallen by over 80% in the past decade.
- London requires an estimated 88,000 new homes annually to meet demand.
A combination of frozen tax thresholds and stamp duty rules is making it significantly harder for first-time buyers in London to afford a home, according to an analysis by Moneyfacts. The research indicates that the average London property now costs 14.7 times average earnings once taxes like stamp duty, national insurance, and income tax are factored in. This is more than double the affordability burden seen in other regions of England.
The analysis highlights that government statistics, which typically only consider property prices as a multiple of gross earnings, do not fully capture the extent of unaffordability. The first-time buyer stamp duty relief cap of £500,000 is now exceeded by most London homes, meaning buyers face an average tax bill of £16,350 upon purchase. Furthermore, frozen income tax personal and higher rate bands disproportionately affect younger workers in London, hindering their savings and borrowing capacity.
Moneyfacts estimates that a first-time buyer needs approximately £70,000 in up-front cash to purchase a typical London home, a sum that would take an average Londoner over 12 years to save. Adam French, Head of Consumer Finance at Moneyfacts, noted that frozen income tax thresholds mean workers retain less of their pay rises, exacerbating the savings challenge. He added that high prices and limited housing supply, coupled with the increasing tax burden, create significant barriers to homeownership.
This financial strain on aspiring buyers occurs as housebuilding in the capital reaches new lows. In 2025, construction began on only 5,547 new private-sector residential homes, an 80% decrease from a decade prior. City Hall estimates suggest London requires up to 88,000 new homes annually to meet demand. French suggested that more flexible borrowing rules and increased housing supply could help, but emphasized the immediate challenge of saving enough money amid rising living costs and a growing tax burden.