- Londoners are set to spend £28.7 billion on homes outside the capital this year
- This represents a 41% fall on the £48.8 billion recorded in 2021 when out-migration peaked.
- The decline is due to those leaving London buying fewer and higher mortgage rates
The number of Londoners leaving the capital to move elsewhere in Britain will fall significantly in 2023, a new study suggests.
This comes after two years of near-record levels of out-migration, according to findings by Hamptons real estate agents.
It claimed Londoners are set to spend a total of £28.7bn on homes outside the capital this year.
It’s a massive 41 per cent fall – or £20.1 billion – from the £48.8 billion recorded in 2021 when out-migration peaked.
The numbers show a major shift from the pandemic when house hunters engaged in a so-called “race for space” as they shunned urban areas in favor of rural and coastal locations after several lockdowns.
Anisha Beveridge, from the Hamptons, said: “With only around a million homes changing hands across Britain this year, fewer Londoners will cross the M25 in 2023.”
The Hamptons said the decline was driven by two factors. First, those leaving London are buying fewer, following the national trend of fewer homes being sold.
The number of homes bought by Londoners outside the capital fell to 69,190 in 2023, the lowest figure in nine years and down from a peak of 100,980 in 2021.
Secondly, the fact that mortgage rates are rising means that those leaving London are also buying cheaper homes outside the M25, so they can afford their mortgage repayments.
Affordability pressures mean the average Londoner buying outside the capital spent an average of £415,020 in 2023, £89,990 less than the average spend of £505,010 last year.
Despite the decline in numbers, affordability pressures mean that the rate of out-migration in London has increased over the past year and remains higher than before Covid.
Londoners made up 7.7 per cent of all buyers who bought property outside the capital in 2023, up from 7.3 per cent in 2022 and 6.8 per cent in 2019.
However, the pace of out-migration in London remains lower than when it peaked at a 15-year high of 7.8 per cent in 2021.
Of the 32,090 families who sold a home in London and bought it outside the capital, 77 per cent spent less on their new home than they sold their main residence for.
This figure has jumped from 60 per cent in 2022. On average, movers are spending 39 per cent less on their new home outside London.
This equity release means a record number of people are paying cash for their new home outside the capital.
Of the families spending less on their new home in the regions, a record 81 per cent bought without a mortgage, up from just 51 per cent in 2022.
Typically, these are older people leaving London in search of a smaller home, downsizing to free up equity or liquidating their remaining mortgage balance in the face of rising interest rates.
These Londoners are liberating the bedrooms too. A total of 41 per cent of those trading up in London for areas moved into a home with fewer bedrooms, up from a low of 23 per cent in 2020 when the race for space was in full swing and buyers moved in search of larger homes.
Overall, those who moved to a smaller home made up 13,030 of the 32,090 people who left London this year.
In total, those who swapped a London home for a cheaper home outside the capital freed up 5,210 bedrooms this year.
First-time buyers will make up a larger share of sales nationally this year, and it’s a similar story for those leaving London.
First-time buyers will make up a record 30 per cent of Londoners buying outside the capital in 2023.
Ten years ago, this percentage represented only 12 percent. High interest rates have limited their ability to borrow, forcing them to buy in more affordable areas.
In addition, cost of living pressures and record rent growth in the capital have made it difficult for them to save.
First-time buyers in London are set to buy 20,940 homes outside the capital in 2023, more than three times the number of 5,850 a decade ago.
On average, they moved a record 25.5 miles outside the capital this year, up from 20.8 miles in 2019.
Therefore, it is the affordable commuter areas outside the M25 that have seen the greatest rise in the ratio of potential London buyers to local residents.
In 2019, Londoners were almost matched by applicants from elsewhere who were looking to buy in Epping Forest.
However, Londoners now dominate the market, and this year there were 3.9 house hunters from the capital looking to buy in Epping Forest for every house hunter from elsewhere.
“However, those who did tended to be downsizers or first-time buyers,” added Anisha Beveridge, of the Hamptons. Downsizers, fed up with life in London, are looking further afield to free up cash and clear their remaining mortgage balance.
At the same time, rising mortgage rates have reduced the purchasing power of first-time buyers, causing them to look further afield for affordable homes.
“With mortgage rates expected to continue to decline in 2024, the affordability picture should improve. We expect this to slow the pace of out-migration somewhat in London, as younger Londoners are increasingly able to purchase property locally.
“Lumps, which have held on in a weak 2023 market, are likely to return to the fold as borrowing becomes cheaper, meaning they are likely to dominate those leaving capital next year.”