A report by the Guardian has cast a very interesting light of the London property market and the growing number of people moving to other parts of the UK. During the 12 month period to the middle of 2016 the report states that 292,000 people left the London, moving to all four corners of the UK. This is a 14% increase on a decade earlier and the highest figure since 2006. So why are Londoners deserting the capital?
Even though the London property market is coming under some pressure in light of Brexit, it is still relatively expensive compared to the rest of the UK. As a consequence, it seems that many London property owners are now happy to cash in their property chips which offer better value for money in other areas of the UK. Whether this will have a material impact upon London property prices in 2018 remains to be seen but it is certainly an interesting trend.
We have also seen a number of London councils forced to look further afield than their local areas to rehouse homeless families. This is because councils looking to expand their social housing portfolios, by acquiring local London properties, can simply not afford current prices. As a consequence families are being rehoused literally hundreds of miles away from their London roots. This is likely to be a trend which will continue during 2018 and beyond, until the issues of social housing and new builds in the UK are fully addressed.
Squeezing local property prices
When you bear in mind the average London property is currently valued at around £482,000, more than double that of the £223,000 average for the UK as a whole, it is not difficult to see problems emerging. For example, during the 12 months in question 4260 people move from London to Dartford in Kent. At this moment in time there is limited supply for the UK property market as a whole so we have 4230 people with cash in their pockets having sold their London properties. Can you guess what happens next?
Well, we know from official figures that property prices in Dartford are being squeezed higher simply because of the influx of Londoners who have sold their more expensive London properties. There have been instances of newcomers outbidding each other, pushing prices higher and higher, which is understandable when they have increased spending power over the locals. However, this is starting to push prices above and beyond the reach of the local population of Dartford.
Increased spending power will turn heads
A number of newspapers have picked up on the fact that Londoners are now leaving the capital for pastures new with significant profits from their property investments. There is every chance that this snowball effect will grow and grow because of the enhanced spending power Londoners have in property markets outside of the capital. There is little that the local authorities can do and in reality markets will simply reflect supply and demand.
Hopefully, as local authorities begin to feel a significant squeeze in relation to social housing and local house price affordability, perhaps they will use their new found borrowing powers to increase their own social and new build house building programs?