Following, we are going to explain the trends that led to this massive change and what it means for young buyers.
1. Ripple Effective
The successive cycles introduced in 1970s consist of economic houses where the property value increases first in London, this wave then goes south easy and other reasons. London always stayed at the front. However, the percentages were not always impressive.
Prices of houses in London have bee n doubled in North (Yorkshire, and Humberside).
2. Income Growth
There have been some changes in regional prices. These are influenced by national factors like low interest rates and an increase in real incomes. The real incomes have had an impact on house prices. A 1% increase in real income will lead to a 2% increasing house prices. This is because households can afford to pay a bit more. This way, the house prices show a bit more volatility than the respective income.
3. Supply, Demand and Other Patterns
Recently, there has been poor income growth in London. This shows that England is operating in a weak national housing environment. But it doesn’t show the regional price pattern. Internal migration patterns, supply shortages, higher demand in London also have their impact.
It’s important we look closely at the southeast and see how outer London relative to inner London and South-East is as a whole. We need to focus on areas that aren’t very distant from each other. Recently, more people left London than the ones who entered it. London has attracted young people recently, but some older groups have left the city. This loss declined until 2009 but peaked once again, especially in 2016-2017.
This pattern is rather consistent and is leaving an effect on real estate prices. As a high proportion of people are leaving London to settle someone where else, there will be a fall in house prices in London as compared to the South East in the past two years.
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4. Types of Property
The price for different types of properties increased and decreased in different patterns. Families can easily move to different locations as they can easily adjust into a different type of property.
With that said, its time we discuss the differences between prices of terraced properties in inner and outer London. This shows the inner London real estate market suffered from a drop-in value. This is once again consistency with Households moving to expensive inner regions.
5. Investment Opportunities
Migration flow isn’t the complete story. The southeast is also suffering from shortages, but it’s time we discuss the monetary environment and low interest rates. Housing in London is included by its role as an investment along with being a consumption good.
Investment motives for buying housing are important in other areas, but London has some special characteristics. Prices in London are more responsive to changes in interest rates than anywhere else.
Speaking of falling prices, the average flat in London costs more than £400,000. The average flat in south-east costs £200,000. Even if we ignore the massive difference, this is still beyond the resources of most first-time buyers unless they have strong additional support. In short, the price falls will unlikely to benefit first-time buyers.