All eyes remained on London’s housing market this week as a flurry of reports signalled a return to a stable property market in the capital, but analysts have warned that the storm may not be fully weathered yet…
As reports by Rightmove showed on Friday morning, first time buyers in the capital continue to be bearing the brunt of rising house prices with the average cost of a mortgage rising by £363 compared to last year.
Young Londoners eager to get on the property ladder and ditch renting now have to fork out an extra £163 every month on mortgage payments as £200 remains the national average.
The average asking price of a first-time buyer property has also soared to new highs this month, costing City dwellers a record high of £498,281 compared to £224,963 across the rest of the UK.
Record new prices
“The combination of a new record price and higher mortgage rates than last year means it is challenging for first-time buyers,” Matt Smith, Rightmove’s mortgage expert, said.
“Our data indicates that first-time buyers who are able to raise their deposit are still finding buying compelling, with the number of people looking to move in this sector currently higher than the last more normal market of 2019,” he added.
As Londoners’ desire to get on the property ladder heats up, figures by Zoopla also showed that households now need an extra £12,000 in income to be able to afford their own place.
The average household income in London required to buy a two-bed home is now £97,000 up from £91,000 in 2020, and a three-bed home is £115,000 up from £103,000 almost three years ago.
‘Priced out of the capital’
Speaking to City A.M, Tom Bill, head of UK residential research at Knight Frank said that rising costs and demand will mean that the market could potentially expect to see homes in traditionally more affordable regions of London such as East and South East rise.
“I think you’re going to see more affordable parts of London coming into favour [amongst buyers] and you’ll also probably see more people move out of London to regional cities to get more bang for your buck,” Bill said, forecasting what lies ahead for the market this year.
The trend of packing up and leaving London boomed during the pandemic as people craved county life and pollution free air, however as costs of living pressures continue to rise, it may also be a trend the market notices this year.
Data by Rightmove reports that the average property price in Reading is £449,731, which is 14 per cent cheaper than London’s £725,715.
“Many people are still moving out of London for cheaper house prices and short commutes to their jobs, Compare My Move has seen a busy Q1 for moves in and out of London with no sign of this slowing down,” Dave Sayce, owner and managing director of Compare My Move, said.
However as mortgage approval rates continue to increase, rising to 52,000 in March from 44,100 in February, Myron Jobson, senior personal finance analyst at Interactive Investor, said the figures reinforce the growing sentiment that the property market is “rebounding from the chaos that ensued the mini-budget back in September”.
He explained: “The housing market could prove to be more resilient than initial predictions. Net approvals for house purchases, an indicator of future borrowing, significantly rose to 52,000 in March from 44,100 in February – although this is below monthly average for 2022 of 62,700 when mortgage rates were lower (on average).
“The upcoming crucial spring/summer-buying season could give us a clear indication of the state of the property market.”