Has London become more affordable post-Brexit?
06 September 2016
By Rosie Rogers
Reallymoving.com analyses whether price falls in London will have any impact on affordability in the capital.
Our last blog cast a dim light on the possibility of nearly all professions, other than chief executives and doctors, affording a home in London.
Even doctors, a generally well-paid profession, only had a 61% chance of owning a home in the capital, according to our Home and Mortgage Affordability calculator.
The prospects for those in middle-income, low or minimum wage jobs – such as train drivers, teachers, nurses, car mechanics, sales assistants and bar staff – were virtually non-existent.
The latest findings from sales database website Home.co.uk have, however, suggested that things could be changing slightly. In the past month, it claims that house prices in London have dropped an average of 1.2%.
More intriguingly, this is the third consecutive monthly drop.
According to Home, further price reductions 'are inevitable in the capital' with more sellers overloading the market. This comes as people indulge in 'panic selling'.
Sellers may be worrying about negative equity or the prospect of not getting a fair and reasonable asking price for their property, so they act quickly before prices dip further.
While there has been no widespread consensus about the effect the vote for Brexit has had on house prices, there have been numerous reports of prices flat-lining or dropping slightly.
This, on its own, is not necessarily a reason for sellers to worry. However, if it becomes a more long-term trend, panic stations might start to set in. For now, it’s still way too early to judge the impact of June’s vote – that will become clearer over time.
But prime central London has definitely suffered, with a number of high-end estate agencies reporting a drop in house prices in recent months. Again, it’s unclear if this is to do with Brexit – and wealthy overseas investors being spooked – but there has been evidence to suggest that prices in the prime London market have been falling for a while now, with the uncertainty in the run-up to the EU referendum certainly not helping matters.
What does all this mean for affordability, though? Well, falls in house prices are good news for buyers, but the sort of price drops we’ve been seeing in London recently haven’t suddenly made the capital a haven of affordability. It’s still a very expensive place to buy.
According to Rightmove, the current average asking price in London is £635,710, while Zoopla has it down as £634,724. Even Home, despite its doom-mongering and downbeat forecasts, has the median price of properties for sale in London standing at £650,000, with the average price of a one bedroom home currently £553,483.
None of which suggests that affordability in London is particularly improving, or that small price falls are going to make much of a difference.
Unfortunately, as things stand, property in London is still going to remain out of reach for a high percentage of train drivers, police officers and teachers.
House prices would have to fall drastically, or wages would have to go up dramatically, for London to become 'affordable' once again to anyone but the well-off (or those with a big helping hand from the Bank of Mum & Dad).
It’s a pretty bleak picture – that large parts of the capital city are unaffordable for so many professions – but it’s going to take a very radical approach to change that. When £350,000 is at the lower end of the market and deemed affordable, you start to understand how so many occupations would struggle to afford a home in London.
So, despite these price falls, the advice is much the same as before – if you want affordable homes, it may be easier to focus on locations like Manchester, Glasgow, Belfast, Cardiff and Birmingham.
All of these cities currently offer more affordable properties, but jobs may be scarcer and pay packets not so high. Again, as is the case with so many things, it’s pros and cons, swings and roundabouts, good sides and downsides.
To make the capital genuinely affordable for its workers, rather than slowly but surely pushing them out, there needs to be a supply of genuinely affordable homes.
The government has promised much on affordable housing, in particular for first-time buyers – Starter Homes, Shared Ownership, Help to Buy, etc. – but there are question marks over how much has actually been delivered, while the amount of social housing continues to fall and the private rented sector continues to swell.
Assuming things carry on as they are, a repeat of our Home and Mortgage Affordability data in five years’ time would be likely to bring much the same results in London, with little to suggest that affordability will be improved in the short, medium or long-term. Even with Brexit-inspired panic selling chucked into the equation.
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