Central London boroughs have barely seen home costs rise since 2016, that means they’re dropping worth in actual phrases resulting from inflation, analysis from asset supervisor Rathbones has revealed.
Wandsworth, Lambeth, Tower Hamlets, Kensington and Chelsea, and Westminster all noticed annual development of lower than 0.5%. Southwark skilled a 2% decline in common home costs over the identical interval.
Over the identical interval CPI inflation reached as excessive as 9.1% in 2022 and seven.3% in 2023.
Rebecca Williams, divisional lead of economic planning at Rathbones, mentioned: “As soon as a haven for property funding, the London property growth is nicely and actually over. Our analysis exhibits that the important thing components which as soon as fuelled the meteoric rise in home costs not apply.
“We’ve additionally seen a rising variety of shoppers with substantial property portfolios trying to disinvest, amid hypothesis {that a} new property tax – equivalent to nationwide insurance coverage on rental earnings – may very well be launched within the upcoming Funds. Such a measure may very well be the ultimate nail within the coffin for London property as a viable funding.”
Even in outer London, the place costs have risen extra noticeably since 2016, they nonetheless didn’t outpace inflation in each borough.
Bexley noticed a reversal in fortunes, shifting from the worst to the most effective performing borough for home value development. Nevertheless, the common property worth in Bexley nonetheless solely rose by 2.8% per 12 months – 5.2% slower than the expansion seen between 1995 and 2016.
In distinction, equities have continued to ship inflation-beating returns. A easy portfolio comprising 25% UK and 75% international shares grew by a mean of seven.2% yearly between 2016 and 2024.
The golden age of property possession within the capital spanned from 1995 to 2016, throughout which home costs rose by 9.1% yearly – sooner than every other UK area and nicely above the nationwide common of 6.5%.
In some elements of London, home costs even achieved double-digit annual development. In Hackney, Southwark, Lambeth, and Westminster, costs rose by greater than 10% per 12 months between 1995 and 2016.
Wanting again over greater than a century, Rathbones discovered that UK home costs sometimes hovered round 4 instances common annual earnings between 1910 and the late Nineteen Nineties. After 2000, this ratio greater than doubled, with costs reaching as much as eight instances common earnings- making property considerably much less reasonably priced for the common purchaser.
A long time of low rates of interest have given option to international instability, fuelling inflation and driving up mortgage prices. In the meantime, increased prices for landlords – stemming from tax modifications, stamp responsibility surcharges, and stricter rules such because the upcoming Renter’s Rights Invoice – have additional diminished the enchantment of buy-to-let and second-home investments.
Charlie Newsome, divisional director at Rathbones, mentioned: “Many buy-to-let and extra rental properties, the place yields had been already razor-thin, have now turn out to be unviable as companies as a result of twin pressures of rising rates of interest and more and more burdensome regulation – set towards a backdrop of stagnating property costs.
“It’s no shock that a number of of our shoppers have opted to promote their buy-to-let properties and use the proceeds in ways in which higher align with their long-term plans—together with gifting belongings for inheritance tax planning.”
