LONDON: For years, Britain’s young professionals have faced a dilemma: the best job opportunities are in a city that has some of the world’s most exorbitant house prices.
At the peak in 2017, the cost of an apartment in London was more than 12 times the median annual employee earnings, even though workers in the capital get a substantial pay premium compared with the rest of the United Kingdom.
Scraping together a deposit required a very well-paid job, family wealth or both.
While properties are still extremely expensive, there’s a glimmer of hope for young Brits.
Taking a first step on London’s housing ladder is not as daunting as it once was.
For the typical London worker, apartment prices are now below nine times their annual earnings, the most affordable level in 12 years, according to Bloomberg’s analysis of Land Registry and official earnings data.
In real terms, flats in the capital are 22% cheaper than a decade ago.
London’s wider property market has diverged from the national picture. Overall its home prices have slipped back 15% since 2015 when adjusting for inflation, compared with a 5% gain across the United Kingdom.
Several factors, from Brexit to tax hikes, reined in a market once seen as overvalued. For apartments, a clampdown on landlords and a post-pandemic preference for bigger houses also hurt valuations.
“This under-performance in flats is about the search for space and buyers prioritising houses since the pandemic,” said Richard Donnell, executive director of research at Zoopla, who also highlights mortgage regulations as a factor.
“Then we have the Brexit vote and multiple tax changes aimed at buy-to-let investors and overseas buyers,” he said.
“This hit demand at a time when there was a lot of uncertainty about investing in London generally by business.”
The capital’s property price premium over English homes as a whole has shrunk to its lowest in 14 years, according to data by Hamptons.
It means London house valuations are less than double the national average. At the widest gap in 2016, the capital’s properties were worth 133% more than their English counterparts.
“Historically, London has gone through periods of strong outperformance,” said Aneisha Beveridge, head of research at Hamptons.
“What’s different this time is the impact of recent tax changes, especially around stamp duty and the treatment of non-doms, which we believe have shifted the outlook for the capital’s property market.”
New figures from Rightmove yesterday showed that the boroughs of Westminster, Camden and Newham suffered the biggest year-on-year falls in asking prices from sellers in December.
Overall valuations of properties coming on to the capital’s market are flat compared with a year earlier, better than the 0.6% fall seen nationally.
Rightmove said there are early signs of a rebound in the market after budget speculation dampened activity. It saw a 24% week-on-week increase in the number of London sellers at the top of the market. — Bloomberg
