Is London facing a mass exodus of homeowners?
Rising living costs and prohibitive transport prices are forcing young talent to rule out the capital as a prospective place to live and raise a family, eschewing the career benefits that the city offers.
It’s no secret that many view property prices in London as extortionate, with homes costing up to 13 times the average worker’s wage and skilled service workers having to work in the region of 14 years just to afford a deposit on a 60sqm house. For many decades, this has been an acceptable part of the capital’s lifestyle, where the benefits of job availability, high levels of pay and the ‘bragging rights’ of living at the epicentre of the international business world are worth the hassle of expensive living.
Recently, however, the tide has shown a change of direction – and the number of those leaving London to enjoy shorter commutes and cheaper living is rising rapidly. Even those whose families have lived in the capital for generations are upping sticks and fleeing to pastures new.
London itself has always attracted highly-skilled workers to help it solidify its position as the most successful city on the planet, but it is now facing a huge crisis, as those same workers are finding the living costs too much to bear. In a recent poll, four out of five Londoners in their twenties admitted to considering leaving the city for good, begging the question how long the capital will continue to function at such a high level if it can’t retain the best talent?
The greatest concern for attracting talent is that many younger people of child-rearing age are slowly realising that they would be unable to afford to raise a family in London, so would be forced to choose between their career and the urge to have children.
Another huge issue for those looking to move out of the capital is finding a UK homebuyer with the necessary wealth to afford their homes, along with the huge day-to-day expenditure the city requires. However, considering that many moving to the city are in house-sharing situations due to exorbitant rent prices, the pool of those wealthy enough to buy a London home is becoming smaller and smaller.
Of course, there are other options for sellers, such as house buying companies who can help those looking for a quick house sale and will buy any home for cash, but the continuing exodus of workers (63,000 families in 2015 alone) does not bode well for the city’s future – with Liverpool, Manchester and Birmingham-based companies offering similar career prospects but with a cheaper lifestyle and a shorter commute, leaving London facing the prospect of a talent vacuum.
Are you one of the many homeowners looking to sell your house quickly? Ask National Homebuyers for advice, as we guarantee to buy any home. Call 08000 443 911 or request a call back to find out how much you could get for your property.
House prices will be up 50% and rents 25% by 2025
Rents are set to sky-rocket, and buying a house is getting further out of reach for many, according to the Association of Residential Letting Agents (ARLA) and National Association of Estate Agents (NAEA) Housing 2025 report. Compiled with Centre for Economics and Business Research (Cebr), the report predicts the state of the property market in ten years’ time, and suggests what can be done to repair it.
With the average house price currently around £280,000, the Housing 2025 report predicts house prices will increase by half (50%) their current value by 2025 – reaching an average price of £419,000. It’s even worse news for those living in the capital, as house prices are expected to nearly double in the next decade in London, rising from £515,000 to £931,000.
The rise of rental costs
For those planning to enter the rental market in the next few years, the news is just as bleak. Rents are predicted to increase by 27% from a current UK average of £134 per week to £171 in 2025. Again, those living in London will be worse off as they’ll need to pay 34% extra in rent per week by 2025, an increase from the current average of £234, up to £314.
Lower homeownership rates amongst the working age population and the ageing of the baby-boom generation will continue to drive a decline in the proportion of UK households that own their own
home. Currently around 62% of the working population owns their own home; the ARLA and NAEA Housing 2025 report predicts this will fall to 55% in the next ten years.
A declining homeownership rate will boost demand for rental properties, and drive house prices up. The Housing 2025 report also predicts the proportion of private renters in the UK will increase from 20% of households in 2015, to nearly 29% by 2025.
David Cox, managing director, Association of Residential Letting Agents (ARLA) says:
“Buying and renting a home is a giant step, and is out of reach for many. Rent costs are already growing at a rate that people are struggling to keep up with, and they’re due to become even less sustainable over the next decade – particularly when the new landlord tax sets in, which will put off many would-be landlords from entering the market. If we’re to see the property market lifted out of its current state, we need to help the rental market from top down as well as bottom up, ensuring landlords are not penalised for their choice of income, and they can in turn give tenants the best possible price and service they deserve.”
Mark Hayward, managing director, National Association of Estate Agents (NAEA) says:
“House prices are only going to go one way, and unfortunately that is up. For so many already priced out of the market, this is news aspiring house buyers will not want to hear. Ongoing house price inflation, combined with low wage inflation, tighter lending restrictions and a shortage of affordable housing, means owning a home will continue to be distant dream for many. Increased rental costs will also make it more difficult for current renters to save for a house deposit; as much of their income will be eaten up in rent.”
ARLA and NAEA recommend the following solutions to solve the housing crisis
In order to prevent continued supply shortages and make house prices and rental costs more affordable for the UK’s expanding population, a drastic and immediate policy overhaul is necessary.
- Giving a wider scope of powers to the Private Rented Sector Taskforce and providing government debt guarantees would encourage large-scale institutional investment into the private rental sector, creating more available properties and helping to bring rental costs down.
- The government should make a scheme similar to the London Rental Standard mandatory across the country, to create a way of distinguishing letting agents and landlords who maintain their properties to a high standards, thereby improving the condition of private rental properties coming onto the market.
- The government should continue its effort to revisit the idea of reducing the area of the Green Belt and set up a committee which would explore this possibility in detail.
- The government should add construction sector occupations, such as brick layers, to its shortage occupation list, making it simpler for employers to hire non-EU nationals.
- Longer term, the government should incentivise firms in the construction sector, to offer more apprenticeships and training programmes.
- The government should form an advisory body in the form of an independent housing policy committee, which is not directly elected.
- The government should offer a stamp duty exception to pensioners looking to downsize their property.
David Cox, managing director, Association of Residential Letting Agents (ARLA) and Mark Hayward, managing director, National Association of Estate Agents (NAEA) say:
“Our simple plea before the election was ‘Britain deserves better’. Since the General Election, the government has pledged to solve the acute problems facing the property industry, aiming to build one million new homes before the end of this Parliament in 2020. But words simply aren’t enough. The housing crisis Britain is facing is deep-rooted and if it is to be solved, it will require finance, suitable land, time, new skills and most importantly, the appropriate national regulation of the key stakeholders, not least the estate agents and letting agents that form our membership. We are calling for change – and it needs to happen soon.”
Are Luxury London House Prices Falling?
The West End of London has long had a reputation for exorbitant wealth and opulence. A reputation that was substantiated last week by the sale of an 11ft by 7ft run-down car garage in Chelsea that was sold for £550,000. That’s more than double the UK average house price stipulated by Rightmove of £271,669. In fact, a combination of a stronger pound against the dollar and increased office rental costs have recently seen London leap-frog Hong Kong to become the world’s most expensive city. The stronger pound and the threat of the mansion tax has also meant, however, that London’s premium properties have increased by only 3% this year compared to the 41% appreciation since the financial crash of 2008…
… So, is the luxury london property bubble about to burst? And what does that mean for the rest of us?
There has, after all, been compelling arguments that suggest that London’s luxury developments are responsible for saving the UK’s mainstream housing market. London is home to more millionaires per capita than any other city in the world and has more billionaires, 72, than any other city in the world, edging out New York and Moscow. The recent crisis in Ukraine, moreover, has seen even more Russian – and Ukrainian – capital flow into London amid fears of international sanctions.
The aforementioned increase in the strength of sterling and threat of a mansion tax, alongside a number of other economic and policy changes threaten to change the way business is conducted in the capital. To continue, this could potentially reduce the number of foreign investors in London as they seek out more fertile cities and emerging markets worldwide. There are economists and academics who believe London’s property market could unravel, but there are also those that believe domestic concerns in other countries could sustain or even increase the amount of money pouring into London, mostly from Asia. Either way, the UK housing market as a whole remains inextricably linked to events occurring in London so we will all be affected. How things will unfold is still unclear, only time will tell…
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House Prices May Be Rising But Can You Really Afford To Move?
The media is full of news that the UK housing market is improving; more houses are selling and house prices are now starting to increase in some regions, which is largely thanks to the government’s Help to Buy scheme. You may be tempted to upsize and move up the property ladder, but it is important not to forget all of the other costs involved in buying and selling a house and actually moving. Here is a rough breakdown of the costs you may incur when moving:
Estate Agents Fees
The best way to sell a property for the highest price is to use an estate agent who knows the local market, but their fees can vary from 1% – 3% + VAT, which means that on the sale of a property worth £250,000 you could end up paying a commission of £9,000. Always try to negotiate estate agents fees; in many cases they will actually be willing to reduce their fees to gain an instruction. If you live in Scotland then you will have to pay for a Home Report before selling on the open market, which can cost you up to £1000.
The legal fees for selling a property are slightly less than for buying, and they do vary by region, but you will face fees of up to £800 for the sale of your property. Don’t forget that if you are buying another property you will need to cover the costs of conveyancing for that as well, which will be higher than the sale. The solicitor’s fees for buying a property, depending on the region, can exceed £1000 and you will also have to pay stamp duty, which will vary depending on the property value. The stamp duty for a property worth £300,000 is 3%, which would leave you with a tax bill of £9,000!
You may incur early repayment fees from your mortgage company, this is more likely if you have a fixed term mortgage or have received a special rate, but you should check with your lender as to what the cost of repayment will be. If you take out another mortgage with the same lender, they may waive the repayment fees for you.
If you are re-mortgaging with a new lender, your old mortgage company may charge you to release the deeds, this could be anything from £125-£300. Your new lender will also require a survey, which you will have to pay for, which can cost anything from £99 to £1000.
It is likely that you will need a removals firm to help you move your belongings; it is normal to complete on your new purchase on the same day as your sale completes, so you will need to move your entire house full of belongings on one day! The cost of removals can vary dramatically, but you are looking at around £1000 to move your belongings.
All in all, moving house could cost you in the region of £20,000 on top of the price of your new home, so it is important that you consider the true cost of moving before you put your house on the market. If you are in the position whereby you have to move, then there are ways of reducing the cost of moving house. You can find companies like UK property buyers National Homebuyers who can appoint a solicitor for you, offering a fixed-fee service for competitive rates. You should always try to negotiate fees with estate agents, mortgage companies and removals firms to try and get the best possible deal.