Higher mortgage rates have paused the unwinding of arguably the biggest Covid-induced trend in the housing market – London outmigration. Rather, this year London outmigration has increasingly been driven by need over want as higher mortgage rates reduce buyers’ budgets, pushing them in search of smaller homes in more affordable areas.
London Outmigration: The numbers
- Londoners accounted for 7.7% of all buyers outside the capital during the first half of this year, outpacing the 2015-2019 average of 6.9%. However, this figure is slightly below the 7.9% recorded in both 2021 and 2022.
- Overall, Londoners purchased 32,600 properties outside the capital during the first six months of this year. A broader slowdown in the number of sales taking place across the country has meant that, Covid aside (H1 2020), this marked the second lowest figure since 2015.
- More than three-quarters (78%) of these homes were bought by a first-time buyer or mover permanently leaving London. They purchased 25,350 homes outside the capital during the first six months of 2023, 5,800 or 19% fewer than the same period of 2022.
- If outmigration continues at the same pace throughout the remainder of the year, it’s likely that 53,780 Londoners will permanently leave the capital to buy a home in 2023. This almost matches the total number of homes sold in Wales last year (56,000).
The financial upside
First-time buyers, in particular, have felt the pressure from higher rates. So far this year they made up a record 30% of London buyers purchasing property outside the capital, up from 27% last year and more than double the proportion (12%) recorded a decade ago. With few able to afford to buy where they currently rent in the capital, this move to a more affordable area outside the M25 is set to save a typical first-time buyer with a 15% deposit £8,656 in mortgage payments each year.
Consequently, so far this year more than a third (37%) of London-based first-time buyers left the capital to purchase a home, the second highest figure (after 2018) since our records began in 2009. Given that a record 85% of all London leavers move to a more affordable area, this is set to save mortgaged buyers a total of £357m each year in annual mortgage payments this year. This compares to £157m savings for those who left London in 2019 when mortgage rates were lower.
That said, leaving London is also a way for households to reduce or even pay off their mortgage debt. So far this year 18% of London leavers bought their new home without a mortgage, up from a low of 14% in 2020. Affordability pressures have also reduced buyers’ budgets and meant that London leavers are purchasing cheaper homes. So far this year, the average Londoner spent £429,800 on their new home outside the capital, just over £60k less than those who left in 2022 when mortgage rates were lower. Consequently, 37% of London leavers purchased a one or two-bed home, up from 33% last year.
Where are they going?
London leavers are increasingly trading the South East for more affordable parts in the East of England. The share of London leavers moving to the South East fell below 40% for the first time since 2009 this year. Meanwhile, one in three London leavers headed to the East of England this year, up from 28% in 2022. Local authorities such as Epping Forest, Chelmsford and Stevenage all feature in the top 15 areas that have seen the biggest rise in the share of prospective buyers coming from London since 2019.
While overall buyers are moving less far than last year, the average first-time buyer leaving London travelled 25.0 miles from where they were living, up from 23.0 miles last year and 14.3 miles in 2013. Even though first-time buyers are moving further, they still look to retain strong links with the capital. This has supported values of smaller homes in some of the more affordable towns within an hour’s commute of London.
The future of London outmigration
Looking ahead, the likelihood that mortgage rates will stay higher for longer may keep the pace of London outmigration up. We’re also reaching the point where a large number of households who bought a home at the peak of the London market between 2014-2016 might be looking to move over the next few years. And 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.
