In 2007, 70% of UK households owned their own homes. Now just under 65% do. There are all sorts of reasons for this – see my blog here on rent controls for a few. But there is of course an element of pricing in here: the higher prices go the fewer successful first time buyers there are in the market.
But one point we have made over and over again in this property cycle is that the overpricing of houses is very much a London/southeast problem (one that is a function of foreign buying, of credit, and of the number of people in London finally getting back to pre-WWII levels).
It is also one that we have long assumed the market will deal with in the end. In my blog post from last year, I suggested that anyone thinking about moving out of London got on with it: prices between London and the rest of the country often diverge, but they also always snap back in the end. That’s because the market works.
When people can’t afford to live in one place, they move to another place and prices adjust accordingly. It might not happen as fast as some might like (and prices in the south have clearly over shot on the upside). But it happens. And that’s good.
Early last year it looked like time for the snap back to start in the UK (either by London prices falling or non-London prices rising). It now is: house-price growth is falling in the capital and rising elsewhere. The question this time is just how it will go.
The overshoot has made houses some distance from London look remarkably attractive. But the price differential also coincides with a time when many of our other cities are revitalising and when remote working is finally becoming more than just a dream for the nation’s professionals.
Let’s start with the countryside. A report from the Office of National Statistics (ONS) this week told us, as The Telegraph puts it, that “a new breed of refugees” is leaving the cities for a better quality of life in rural Britain.
Over the next ten years, more than half a million people are forecast to leave the city to settle in the country. These people will be “significantly wealthier, better educated and more enterprising than the population at large.”
They will be more likely to set up a business, and to drive up economic activity and hence productivity than your average buyer. That rather suggests they might pay more for houses than your average buyer too.
The Institute for Public Policy has come up with similar research noting that those who find London too expensive will either move to the country or to other cities – think Bath, Oxford or York. From there they can easily set up new businesses or work from home three days a week and in London two days a week.
As Rosie Millard points out, also in The Telegraph, the “internet revolution is a massive boost to this way of thinking. The fact that so much work can be done remotely – wherever there is a wifi signal – “helps spread wealth around the country” rather than keeping it focused on traditional hotspots.
I suspect a good number of the London leavers will be heading north, where houses are priced roughly as they should be and some of the larger cities are booming with interesting start ups and talk of the promotion of a northern powerhouse created via transport spending and local devolution.
Note that George Osborne has recently announced that the Tories are the “party backing the north”.
We aren’t generally great fans of property investment, but if you want something for the next ten years, you could probably do a lot worse than a good house in the north (of the kind the ONS’s new rural refugees would like to live in), close-ish to a mainline station within three hours of London.