The high cost of homes in London, particularly in the city’s prime central property market, is putting off younger people buying a property as this would mean compromising commuting time and facilities.
New research suggests that in order to stay in central London they are opting to rent a home instead and delaying getting onto the housing ladder with their decision helped by a fall in rental rates over the last three years.
The analysis from real estate firm Cluttons in conjunction with the Consumer Data Research Centre and University College London set out to find out what attracts people to certain areas in London and suggests that many are willing to forego home ownership in pursuit of a certain lifestyle.
This, the report claims, contributes to increasing the population density in many prime central London locations, where accessibility levels are high due to the high concentration of Tube stops.
‘We’ve all heard the anecdotal evidence of people being priced out of central London locations towards suburban locations, but we wanted to put some substance behind the claims and the results have been startling,’ said Faisal Durrani, head of research at Cluttons.
Overall it suggests that affordability mean that younger professional people are drawn to renting larger homes at what is perceived to be better value for money through shared tenancies. This pattern is increasingly common in locations believed to offer better access to their places of work, highlighting the importance of connectivity.
Effectively these individuals are foregoing home ownership, albeit temporarily, in favour of the perceived ease of commuting and perhaps, access to a certain lifestyle, the report explains, adding that it is also clear that the financial squeeze faced by households through rising inflation, which is eroding real incomes, in addition to mounting deposit sizes, is also playing a part in delaying the transition to owner occupation.
‘The most fascinating finding from the research has been that high house prices are both a pull and push factor for Londoners looking to move around the city. We were able to demonstrate through modelling that when you consider house prices in isolation, areas with high house prices effectively deter residential migrants,’ said Durrani.
‘But what was really interesting was that when we then expanded the model to take account of socio-economic groupings, high house prices conversely acted as an attractive force for residential migrants. The way we explain that is that those postcodes containing the city’s more expensive accommodation tend also to be perceived as prestigious and offering better quality of life. Households aspire toward those areas, limited obviously by affordability,’ he pointed out.
The specialist modelling showed that Mayfair was least likely to produce residential migrants, perhaps as those living there feel they are at the pinnacle of home ownership and wish to continue enjoying high house price growth, rather than moving on. Cluttons claims this mirrors their experience in the market as there is a dearth of homes for sale here which has fuelled house price growth, exacerbating the area’s unaffordability to aspiring home buyers.
East Dulwich, Greenwich, Canada Water, Maida Vale and Hammersmith emerge as the top five areas most likely to attract residential migrants, not least due to their relative affordability, compared to prime central London locations.
However, Maida Vale stands out amongst the markets mentioned above. Its proximity to the West End and high level of accessibility suggest this is certainly going to be a market to watch going forward. The 207% house price growth registered here over the last 20 years may be just the beginning of a remarkable growth story yet to come, the report concludes.