Now could be the perfect time for Londoners to sell up

‘Quit while you’re ahead’. That was the headline on an article about London house prices in the Sunday Times last month. It suggested – as we often have here – that those who have made vast gains in the London market take advantage by selling up and moving out.

Why now? Because the gap between London property and non-London property is the widest it has ever been. It makes sense to think it will start to close again. Perhaps London prices will fall (however unlikely that might look today) or perhaps the gap will simply narrow back to historical norms as house prices elsewhere rise.

It isn’t happening yet. ONS numbers show that while average house prices are rising at 6.8% in the UK as a whole, and 7.1% in the southeast, London prices are rising even more – 13.2%.

But before you dismiss the idea that the gap might start to narrow, you might read my colleague Matthew’s piece on the subject.

Then note that not all of London is in the eye of the boom – break it down by area and you will see that some parts of the city are seeing prices barely budging (prices in NW1 only rose 3% last year).

Finally, note that – as we have suggested many times in the past – demand creates its own supply. More than 150 new residential towers are planned for central London at the moment, says the FT, involving thousands of new homes. So many that even Savills “concedes that there are already enough homes planned in the coming years to satisfy demand” at the top end of London’s housing market.”

The result is that “we do have concerns that some of these schemes aren’t sustainable”, says Chris Taylor, chief executive of Hermes Real Estate.

We still think it’s a good time to make the trade (assuming you want to live in a Wiltshire manor house rather than a three-bedroom terraced mini-home in Balham).

So what can you swap a house in Fulham for?

Sell this four-bed terrace for £1.65m, and buy this six-bed detached house with ten acres of land in Wiltshire

Or this seven-bed thatched former Rectory

This eight-bedroom house with swimming pool and gym, two cottages, and 21 acres of land in West Lothian

An eight bed house in Hampshire with ponds, meadows and outbuildings

A five-bed house in Cornwall with swimming pool, outbuildings, and fantastic views

A Queen Anne style country house in Herefordshire

Perhaps set up a hotel in this ‘former Gentleman’s residence’ with 14 en-suite bedrooms, 3-bed penthouse flat, bar, and ‘distant’ sea views

Or sell in Fulham and stay in Fulham too (just with a nice country house on the side).

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12 Responses

  1. 27/03/2014, Gavin wrote

    Merryn,

    Would you be able to give us some more statistical detail on how the ratio London:non-London has varied over time and where it stands now?

    Thanks

  2. 27/03/2014, Merryn wrote

    MAddeningly I haven’t got a link but the last chart I was shown had the gap at a record high. Doesn’t mean it won’t go higher of course but most things mean revert in the end.

  3. 27/03/2014, Merryn wrote

    @Gavin. good news. Twitter has provided. Followers send in this http://www.nationwide.co.uk/~/media/MainSite/documents/about/house-price-index/Jun_2013.pdf and this https://twitter.com/CyclopeanView/status/449214876796190721/photo/1 Both make it clear that the premium is as high as it gets. As Nationwide say, “the gap between house prices in London and the rest of the UK is the widest it’s ever been, both in cash and percentage terms.”

  4. 27/03/2014, Gavin wrote

    Oh ok if you find it that would be great.

    Certainly myself I’ve seen charts which appear to show that every single penny of out-performance by London in the run-up to the 1989 crash was given back in the bust.

    Hasn’t happened this time of course (well yet anyway) – thanks you central banks etc!

    I note we had negative real interest rates after the 1972 crash and the property market then went into another minor bubble and crash (unlike post-1989 which was straight down for six years or so). Inflation-adjusted only, no nominal falls. I wonder if that pattern will be repeated now, and also it would be interesting to know how that pattern of events affected London specifically.

  5. 28/03/2014, Paul Islington wrote

    I am not sure your comparison of London real estate vs. out in the middle of nowhere makes any sense…
    Help me understand how living 2h away from London (Warminster, Wiltshire vs. Fulham) is comparable… Keep in mind that London salaries are non comparable to what you are likely to earn in Warminster or in Bath for a similar role.

    Let’s push your twisted argument to the next level… Here are a few properties you can get in France for the same price

    http://www.bellesdemeures.com/annonces/achat-de-prestige/chateau/champagne-51/72340273.htm

    http://www.bellesdemeures.com/annonces/achat-de-prestige/chateau/bordeaux-33/saint-jean-belcier-carle-vernet-albert-1er/69872217.htm

    Or almost 2000 acres (you read that right) in Arkansas, US
    http://www.landandfarm.com/property/1790_Acres_in_Searcy_County_Arkansas-320649/

    and I can only imagine what you could get in bengladesh for over 200million takas…

    Here are a few stats that make me wonder whether house prices in London are grossly over-valued… it appears not:

    According to Halifax, since 1983, UK house prices have risen by 101% in real terms, or 2.45% a year, while London house prices have risen by 124% or 2.75% a year in real term. (FYI FTSE 100 has risen by 105%) – not what you call a staggering difference, is it? especially when indexed against the salary difference in between UK vs. London

  6. 28/03/2014, Gavin wrote

    Paul Islington

    Don’t quite follow your argument, I think we all know London property is not the same as general UK property… otherwise this article would be all about the question “why oh why is London property more expensive than elsewhere?” the whole article is about how it has varied relative to the general UK property market

    and for your comment about 2.45% versus 2.75%, the power of compound interest makes that quite a significant difference over thirty years. And the ratio has varied significantly as Merryn’s graph shows. Interesting

  7. 29/03/2014, JCD wrote

    I did tweet this fact to Merryn a few months ago. The long term average ratio of houses in Devon to those in Chelsea is 4:1. In the last 18 months it has risen to over 6:1.

    It will revert to the long term average so if you are considering relocating now is the best time to do it in the last 25 years…….

    As Merryn replied to my tweet though – you might actually WANT to live in Chelsea instead of Devon!! Who would have thought it!!!!

  8. 29/03/2014, JCD wrote

    PS – that is to say the price of an average house in Chelsea is now worth 6 average houses in Devon up from the long term average of 4. Stats from Land Registry website.

  9. 31/03/2014, mr clyde wrote

    If I had a £100 for every day over the last 30yrs that I have thought that London prices can’t go any higher, I could afford a house in London.

  10. 31/03/2014, Boris MacDonut wrote

    Didn’t Merryn say the same thing in 2007/08? Since when London prices are up 25%.
    Merryn, one good point you are now singing from the same hymn sheet as the “Geographer Royal by appointment to the left” Prof Danny Dorling. Danny advocate a LandValueTax in his latest book on the housing disaster…All That is Solid. Do read it. Danny is always correct.

  11. 11/04/2014, Skotcheff wrote

    In the past 8 to 10 years I have seen the biggest changes within the London life and dynamics, I run two completely different businesses one is a chauffeur hire company which has picked up in demand from most corners of the world coming into London and many more people utilising us for sightseeing tours, I’m not complaining as this is helping out a small business, but certainly shows a drastic increase in wealth… however on the other end of the spectrum the dynamics are very different, the of the business I have is a removals company really predominantly as we are unable to compete with the big companies with there hefty advertising budgets we have mainly run more of a man and van service, so, much smaller moves… what has significantly changed here is the volume of people continually negotiating us down on price and sadly a proportion of these individuals are literally forced out of London to then find more affordable accommodation elsewhere in the country too far to commute from their current place of work. For myself and my staff we in actual fact have had to charge less than we were 6 years ago just to keep that side of the business going.

    I personally feel that this is very dangerous territory, and certainly a larger repeat of the start to the fall of the Roman Empire. We are still not servicing our debts as a country, finding affordable and non-polluting ways to live and travel, tackling the wast overpopulation which is more than likely part of the cause of the overall pending crisis.

    Leaving that aside, we also have a completely different dynamic of buyer from overseas in the market like the Chinese who buy flats off plan, never move into them, as they are purely a commodity rather than living accommodation, this is almost the same thing wealthy Brits managed to do with our sacred countryside, with weekend retreats, don’t get me wrong I would do exactly the same! But, it means not only can villagers cannot afford to by in their own town due to price hikes, there is less local jobs available because most things become seasonal as they are more of a holiday destination…

    Anyway rant over!

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