London's space chasers

AUGUST 2021

Leaving the capital has been a rite of passage for Londoners across countless generations. And getting more space with their equity has always been one of the top reasons for leaving. For most of the last decade, Londoners have been able to cash in to buy a substantially larger home than they own in the capital. But the amount of extra space they can afford has been falling for the last five years straight, dropping to the lowest level since 2013.

The average Londoner who cashed in on their home in the capital for £499,990 and moved to the country could afford an extra 633sqft from their sale proceeds. This is down from a peak of 1,038sqft in 2016.  Londoners moving to suburbia gain a little less due to higher prices, an extra 575sqft on average, but again this figure is down from a peak of 916sqft also in 2016. Despite this large drop in their buying power, there are no signs that it is deterring Londoners from making the move out.

Although the amount of space Londoners can buy using their existing equity has been shrinking since 2016, the pandemic has accelerated the trend. Typically the first half of each house price cycle is dominated by price growth in London outstripping the rest of the country, and the second half by the rest of the country catching up. However, the race for space caused by the pandemic has squeezed what might have been three or four years of prices rebalancing gradually into 18 months.

This may mean that over the next couple of years future commuter belt price growth is likely to be tempered having been brought forward, particularly in places heavily reliant on London equity. By that time, the percentage difference between house prices in London and the rest of the country is likely to be back within touching distance of where it was at the very beginning of the last house price cycle in 2008.  For those looking to leave the capital, it means they’re likely to gain less space in a few years’ time than they would by moving today.