Prime Country Residential Markets

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It is well documented that since the credit crunch the gap between house prices in London and the rest of the country has continued expanding as values in London experienced a period of very strong growth. Average house prices in London are currently 2.3 times the UK average, the largest differential since records began in 1973, according to Nationwide.

Beyond the capital, the strongest price growth has been in the markets most accessible to London, fed by demand from commuters and stronger economic growth. Despite this, the gap in value between London and the South East and East has also reached an all time high. This led to a reluctance to trade out of the London market while prices were rising at such a rate.

However, the outperformance by London is slowing in the mainstream markets and the trend has already reversed in the prime markets. The additional stamp duty costs and increased mortgage regulation have slowed price growth in the prime markets right across the country but most particularly in London. Annual growth in every prime region (excluding Scotland) has outperformed prime London since December 2014 and we are forecasting this to continue for the next few years, particularly in the London commuter belt.

This means households currently living in London, in need of more space, face a choice. Do they trade a twice daily train journey, commuting costs and hassle for more affordable house prices and lifestyle benefits?

The financial incentives are obvious. Our analysis of over 300 stations outside London, on direct commuter lines into the capital, shows a clear price differential with an average price saving of £3,048 per additional minute of commuter journey time from London.

The average house price in inner London is £606k. By comparison, commuter locations within half an hour’s train ride from London have an average property price of £458k. Further out, the average price is just £337k for those with a journey time between 60 and 69 minutes.

Of course, any house price savings must be set against the costs of commuting. An annual rail and underground season ticket now costs from £2,400 to nearly £10,000, depending on the length of the journey and rail provider. Despite this, the savings on house prices will more often than not outweigh the travel costs.

We have already seen an increase in the number of households making this trade off and moving out of the capital. Analysis of Savills buyers in the London commuter belt shows 30% of sales over the first quarter of 2016 were to those relocating from London compared to just 23% during the same period in 2015. We expect this trend to continue as the ripple effect continues to take hold.

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Established And Emerging Commuter Locations