Million-pound homes – part 2 – how to own one

Our expert Residential Property team has seen a relentless increase in the volume of homes in Essex and Herts changing hands for £1m-plus. We’d never blog about clients’ financial affairs, but can still offer some general points on buying in that price range. For instance, help often comes from living relatives or though inheritance, but for most people income is the key to owning a home in any particular price bracket.

The most recent data from the Office for National Statistics shows gross disposable household income averaging £24,696 for Herts; Essex is split up in this ONS dataset, with West Essex at £22,676 and Heart of Essex at £22,889. You won’t fund a million-pound home on those incomes, but both counties have many residents earning far more than average and some who’ve received a windfall such as a major lottery win or the sale of a business stake.

The higher average income in Herts is reflected in the county’s average property value, which Zoopla puts at £487,823. Remember this includes everything from one-bed flats to eight-bed mansions so, as with incomes, the range from bottom to top can be massive. This figure seems to be saying that, taking account of its smaller size, Herts has more highly-priced properties than Essex, where the average value for August 2019 was estimated at £374,842 by Zoopla.

These average price figures clearly show that £1m properties aren’t financially accessible to the majority of homebuyers. Very few first-timers, mainly those who’ve received windfalls, can afford one. However, already having a high percentage of equity in a home worth, say, £650,000 can unlock the door if you have a good annual income.

The purchase is likely to require a mortgage; and how much you can borrow and at what interest rate will often depend on the relationship of the required loan amount to both the property’s value and your annual income. Interest rates have been relatively low in recent years and some mortgage providers specialise in larger loan requirements.

Figures derived from Lloyds Bank research showed Herts and Essex cathedral cities St Albans and Chelmsford to be among the top-20 least-affordable UK cities, in terms of average price to average local earnings, with respective multiples of 8.7 and 7.9. Buying a million-pound home is rarely easy, but being among the ‘least-affordable’ does mean the two counties offer plenty of choice at that price and higher for those in the hunt.