It seems we’re all moving home a little less. Rising interest rates which began in 2022 and spilled over into 2023 have undoubtedly contributed to this trend, but a wider affordability squeeze has played its part too. And Londoners have not been immune.
In our latest analysis of London outmigration – a short-hand for Londoners moving out of town and into the country – some 69,190 swapped the capital for a slower pace of life in 2023, the lowest figure for nine years. The amount they spent in 2023 also fell, by 29% or £11.7bn compared to 2022, and £20.1bn less than in 2021 when outmigration peaked.
It’s not just a fallback in buyer numbers that has caused these headline figures to decrease, but higher interest rates have meant that buyers’ purchasing power has been curtailed too. In 2023 the average Londoner buying outside the capital spent an average of £415,020 on their new property, £89,990 less than the £505,010 average spend in 2022.
Affordability is also driving would-be buyers out of the capital at a faster rate than last year. London is the UK’s most expensive city in which to set up a home and higher rates have made it costly to service a mortgage here. This goes some way to explain why Londoners made up 7.7% of all buyers purchasing property outside the capital in 2023, up from 7.3% in 2022 and 6.8% in 2019.
But who are these movers? Our analysis shows that downsizers and first-time buyers drove London outmigration in 2023.
Downsizers have been using the equity from their London homes to move to a more affordable area. Of the 32,090 households who sold a home in London and bought outside the capital, a record 77% spent less on their new home than they sold their main residence for. This figure has jumped from 60% in 2022. On average they’re spending 39% less on their new home outside of London which has allowed them to pay off their mortgage and potentially free up some equity too. It also means that a record 81% of them bought without a mortgage, up from just 51% in 2022.
These buyers are freeing up bedrooms too. 41% of those trading London for the regions in 2023 moved to a home with fewer bedrooms, up from a low of 23% in 2020. In total, those trading a home in London for a cheaper home outside the capital freed up 5,210 bedrooms this year.
Meanwhile, affordability pressures meant that first-time buyers made up a record 30% of Londoners buying outside the capital in 2023. This is in contrast to 10 years ago when they accounted for just 12%. Higher interest rates have limited the ability of first-time buyers to borrow, a problem compounded by record rental growth which has made it difficult for them to save too.
Under such circumstances, it’s not hard to see why first-time buyers have looked beyond the capital to purchase their first home. As we ended 2023, London-based first-time buyers looked set to purchase 20,940 homes outside the capital in 2023, more than triple the number a decade ago. And they’re moving further too - on average, 25.5 miles outside the capital in 2023, up from 20.8 miles in 2019. Consequently, it’s the more affordable commuter areas outside the M25 that have seen the biggest rise in the ratio of London prospective buyers to locals.
Looking to 2024, with mortgage rates expected to continue falling, the affordability picture should improve. This might slow the pace of London outmigration somewhat, as younger Londoners can increasingly afford to buy locally. Upsizers, who have sat tight in a subdued 2023 market, are likely to come back into the fold as it gets cheaper to borrow, meaning they’re likely to dominate those leaving the capital next year.
