LONDON’s expensive housing market is notorious for pricing out would-be buyers. Now its residents are struggling to afford a home outside the capital as well.
Londoners bought 32,600 homes elsewhere in the UK during the first six months of the year, according to a report from broker Hamptons International. That’s about a fifth lower than the 40,000-plus homes purchased in the first half of 2022, as the priciest mortgages in almost 15 years block many would-be movers and first-time buyers from affording deals.
“This year London outmigration has increasingly been driven by need over want,” said Aneisha Beveridge, head of research at Hamptons. “Higher mortgage rates reduce buyers’ budgets, pushing them in search of smaller homes in more affordable areas.”
UK households are facing an avalanche of cost pressures triggered by rising interest rates and the worst cost-of-living crisis in a generation. Millions of homeowners have already seen the value of their properties decline this year, with some analysts forecasting a double-digit drop in prices as the nation adapts to costlier borrowing.
Meanwhile, London’s first-time buyers are struggling to get on the housing ladder — in or outside the city — as the priciest rents and living costs in the country squeeze their budgets to the brink.
The amount of homes bought outside the capital by London-based first-time buyers dropped 19% year-on-year to just over 25,000 in the first half of 2023, according to Hamptons, prompting a forecast from the broker that this year will see lowest amount of leavers in almost a decade.
What’s more, affordability pressures this year have forced the average London leaver to buy for about £60,000 ($76,233) less than those who left in 2022, with the average spend falling under £430,000. That’s because London leavers are hunting for cheaper deals further away from the capital, the report said, with the average distance moved in the first half of the year rising to the furthest since at least 2009.
Still, more than a third of London-based first-time buyers have left the capital to purchase a home so far this year, the second-highest share since Hamptons’ records began. These buyers are generally happy to settle for smaller homes — typically east of the capital — with the share of movers purchasing a one- or two-bedroom property rising in the first half of the year.
“The likelihood that mortgage rates will stay higher for longer may keep the pace of London outmigration up,” Hamptons’ Beveridge said. “With property prices in parts of the capital lower today than when they bought, trading the city for a cheaper area outside the M25 might be the only option for those needing to upsize.” — Bloomberg