First Time Homebuyers Priced Out Of The Capital
First time homebuyers make up a record 30 per cent of those leaving London this year, new data from Hamptons has found
High mortgage rates are pushing Londoners — particularly first time homebuyers — out of the capital, as buyers look to reduce their borrowing costs by choosing more affordable properties.
New data from Hamptons shows that Londoners bought 32,600 homes outside the M25 so far this year, which represents 7.7 per cent of all property sales outside the capital.
First time homebuyers make up a record 30 per cent of those leaving London this year, spending an average of £429,800 on their properties. This is £96,590 less than they would have spent on a home in London, on average.
The main reason for this exodus of first-time buyers is soaring mortgage rates. Last month, two-year mortgage rates rose to their highest point since 2008, to 6.7 per cent. The average five-year rate also increased to 6.17 per cent.
For tens of thousands of Londoners, these hikes mean that they are facing an extra £12,000 per year in outgoings, with the typical mortgage holder’s payments expected to rise by £220 per month.
Compounded by the rising cost of living, this has proven to be too much for many Londoners, meaning 85 per cent of those who have left the capital to opt for an area where house prices are lower.
This means their monthly mortgage repayments will also be lower — by moving outside the capital, a typical first-time buyer with a 15 per cent deposit is set to save £8,656 in mortgage repayments each year.
Meanwhile home movers are opting to reduce their borrowing or even pay their mortgage off thanks to a move to a cheaper area.
Hamptons’ data shows that London leavers are also purchasing smaller one or two-bedroom homes, spending an average of £60,000 less than last year on their properties.
Likewise, transactions are down on previous years, with the second-lowest number of sales across the country since 2015 (excluding during the early weeks of the pandemic in 2020).
If the trend continues, Hamptons estimate that 53,780 Londoners will permanently leave the capital to buy a home this year. To put this figure into perspective, this is almost as many homes sold in Wales in 2022 (56,000).
In this scenario, mortgaged buyers would save a total of £357 million each year on annual repayments, compared to £157 million in 2019 when mortgage rates were lower.
“Higher mortgage rates have paused the unwinding of arguably the biggest Covid-induced trend in the housing market: London outmigration,” says Aneisha Beveridge, Hamptons’ head of research.
“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.
“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.”
Where are Londoners moving?
Most Londoners are not moving too far away. The average first-time buyer leaving London relocated 25 miles away from where they had been living, while in general London leavers are staying closer to the city than they did last year.
“Most of these movers still look to retain strong links with the capital,” explains Beveridge. “This has supported values of smaller homes in some of the more affordable towns within an hour’s commute of London.”
As in previous years, most Londoners (39 per cent) leaving the capital head to the South East of England, with areas like Havant, Winchester, Medway and Horsham seeing the greatest rise in London buyers.
Homes in these areas are significantly cheaper than London: at £331,410, the average property in Havant costs almost £200,000 less than a home in London, at an average cost of £526,390.
While the South East is still the most popular destination for Londoners, the percentage of leavers moving there is at its lowest since 2009, with people increasingly looking elsewhere.
This year, one in three London leavers moved east, particularly to areas like Epping Forest, Chelmsford and Stevenage. Homes in these areas cost an average of £529,390, £377,590 and £337,230 respectively.
A smaller number of London leavers look further afield. Sunderland, where homes cost an average of £136,070, saw more Londoners moving in than last year, as did Coventry (£225,890) and Mansfield (£181,840).