The UK capital is experiencing a significant shift in its housing market dynamics. Analysis suggests that elevated mortgage rates will prompt approximately 76,000 Londoners to depart from the city in 2024. This exodus is driven by homeowners seeking more affordable properties outside the capital.
During the initial six months of 2024, Londoners purchased 33,000 homes in other parts of the country. If this trend continues, the number is projected to more than double by year's end. The estate agency Hamptons conducted this analysis, revealing that nearly half (48%) of those leaving London were home movers buying their next property.
The average upsizer is relocating a record 39 miles outside of the capital in search of lower mortgage repayments. This trend highlights the financial pressures faced by Londoners due to high property prices and interest rates.
Interestingly, the situation for first-time buyers in London presents a contrasting picture. The proportion of houses in the city purchased by new homeowners reached an all-time high of 48% in the first half of 2024, up from 41% the previous year and 28% a decade earlier. On average, first-time buyers acquired houses worth £443,550, an increase of £39,360 from the previous year, indicating that affluent new buyers are enjoying increased purchasing power.
Aneisha Beveridge of Hamptons noted:
"Falling mortgage rates are starting to turn the tide on the rising number of first-time buyers leaving London. Lower mortgage payments have pulled the cost of buying back below renting, bringing relief to those looking for their first home in the capital. First-time buyers with deeper pockets are looking again at London, choosing Clapham over Crawley and Wembley over Wycombe."
Despite this trend, the number of first-time buyers leaving London remains substantial. Over the past decade, the proportion of Londoners buying their first home elsewhere in the country has increased from 17% to 30%. Popular areas for Londoners buying their first home include Waverley, Stroud, and Horsham.
Affordability continues to be a major factor in these decisions. Despite falling mortgage rates, the typical first-time buyer with a 15% deposit is paying a record £642 less per month than someone buying in London. According to Land Registry data, the average house in London costs £523,000 compared to £305,000 for the rest of England.
Mortgage deals have generally become more affordable since the Bank of England reduced interest rates from 5.25% to 5% in August 2024. Currently, the best rate on the market is below 3.8%. However, these rates are still high compared to the historic lows seen in recent years. Market predictions suggest just one more rate cut before the end of 2024, with Capital Economics forecasting the Bank Rate to fall to 3% by the end of 2025.
The "Bank of Mum and Dad" phenomenon is also playing a significant role in the London housing market. Aaron Strutt of mortgage brokers Trinity Financial suggests that parents are offering greater financial support to help first-time buyers purchase property in the capital, often to avoid their children paying higher rates.
As the UK housing market continues to evolve, the interplay between mortgage rates, property prices, and buyer preferences will shape the future landscape of London's residential areas and its surrounding regions.