Covid fuels Londoners record spend on homes outside the city

The rapid spread of the Omicron variant is likely to continue fuelling the need for homeworking. Photo / 123RF

Londoners spent £55 billion ($108.4b) buying property outside the British capital this year as the coronavirus pandemic sparked a rush for more living space, according to an analysis of official data.

The findings by estate agent Hamptons back up growing evidence that the pandemic has realigned housing preferences, with potentially serious consequences for the city's population and housing market.

Residents of the capital poured £54.9b into housing outside Greater London in 2021, the highest total for a single calendar year, buying property in commuter towns and further afield, according to the study which used HM Revenue & Customs data.

Londoners purchased about 112,780 homes outside of the capital, just shy of the record 113,640 bought in 2007, which was a red hot year for the housing market, Hamptons said.

The total spent this year smashed the previous record of £36.6b in 2007 and was up almost 60 per cent on 2020 partly because of the rapid house price inflation over the past 12 months.

While the high number of transactions has been a nationwide phenomenon this year, the increase in Londoners buying outside the capital has been particularly pronounced, according to the study.

By forcing offices to close or reduce capacity, Covid-19 has triggered a spike in homeworking, which looks set to be sustained at least into the first quarter of 2022 because of the rapid spread of the Omicron coronavirus variant.

That is one reason why movers are contemplating properties further afield than they might have done previously, said Neal Hudson, director of housing market research company Residential Analysts.

"There's been a general reassessment of housing, with people no longer needing to commute as they used to. That is particularly true in London," he said.

The prospect of spending more time working at home has prompted what estate agents describe as a "race for space", with buyers looking for larger homes with gardens over city centre flats.

Flats have also lost some of their shine as a result of the cladding safety scandal in the aftermath of the Grenfell tower fire in 2017, which has overwhelmingly affected apartment blocks built over the past 20 years.

The pandemic was largely responsible for the exceptionally high number of people leaving the UK capital city this year, said Aneisha Beveridge, head of research at Hamptons, adding that "2021 is likely to mark the largest out migration from London for at least a generation".

She added: "After this year's frenzy, we expect the numbers to fall back a little, particularly as house prices outside the capital are set to continue outperforming London over the next few years."

But the majority buying outside Greater London had remained within the capital's orbit, the study found. Almost half bought in the south-east and a quarter in the east of England. The commuter towns of Dartford, St Albans and Elmbridge were particular hotspots, according to Hamptons.

Over the last three decades, residents have tended to leave London from their mid-30s, as they start families and look for larger, more affordable properties. The population of the city kept growing during that time because of immigration from the EU and a higher level of births than deaths.

But Hudson and Beveridge suggested that, if sustained, the higher outflows coupled with slower inward migration post-Brexit could slow the growth of the capital's population.

"If there is downward pressure on the size of London's population, that could put some downward pressure on house prices and rents," said Hudson.

Written by: George Hammond

© Financial Times