£1 million is not enough: buyers forced out of central London

Where are ordinary buyers going?


Housing market confidence growing

If you want to buy a London home, and all you've got is a paltry £1 million or £2 million, then you can kiss goodbye to any ambitions of owning in central London. Prices are now so high that those who don't have more than a couple of million are retreating to the suburbs.

And this is causing an alarming bubble there too.

Central London bubble

The figures emerged at the Savills AGM. The Telegraph reported the company's view that prices in prime central London have risen so far and so fast that wealthy families can no longer afford to buy there. The average price of a home in these areas has now reached £4.2 million. Not only is this eye-wateringly high - even for millionaires - but because prices have crossed the £2 million barrier they also attract massive stamp duty bills.

It means that millionaires are being pushed into less central parts of London. The Express reported that Savills is seeing price rises slow in central London as a result. In fact, in the last 12 months, prices in these areas have risen just 9% - and the last three months have seen a significant slowdown.

At the very top end, houses worth more than £10 million have hit something of a ceiling, and have only seen 2% growth in the last 12 months.

Suburban shift

Meanwhile, demand is surging for properties between £1 million and £2 million in certain parts of slightly more suburban London. Just south west of the centre, prices have surged spectacularly. Places such as Battersea, Wandsworth, Wimbledon, Richmond and Chiswick have seen prices rise almost 15% in a year. It means that if you want to buy an average house in these prime parts of the south west you'll need an average of £1.9 million.

Meanwhile, around Islington in North London they are up 16% and the average house costs £1.5 million. The East is also seeing spectacular growth, and Wapping values are up 21%. This is coming from a lower base, but prices in prime east London are now an average of £785,000.

Further out

What's particularly worrying, is that once a wave like this sets in, it ripples further and further out of London. It means that areas which were once affordable for ordinary Londoners are pushed beyond their pockets.

Research from Rightmove has revealed that the average asking price in Brent in North London has increased almost 8% in a month. Meanwhile Camden has seen prices rise 7.5% and Harringey is up 7% in that time. Estate agents are also reporting bidding wars, where properties achieve more than their asking price as a shortage of sellers and a surge in demand leaves buyers with few options.

It is is forcing more and more people out of London altogether, and into the traditional commuter belt. Here prices are rising too. Affluent commuter areas in Surrey and Kent are seeing prices between 5% and 10% higher than they were before the crash in 2007. There are also spikes along the M40 and to the North. Recent research revealed that on average families need an income of £60,000 to buy in the commuter belt.

So where are the ordinary people now?

Increasingly areas around an hour from London by train are coming into focus for ordinary buyers. In this time, commuters can get from all kinds of places, including Peterborough, Nuneaton, Fleet, Basingstoke, Swindon or Oxfordshire. According to Zoopla, the average price for a flat in Peterborough is under £100,000, which is a welcome relief from sky-high London costs.

Spending a couple of hours on the train every day, and returning home to the bright lights of Peterborough each evening, is hardly the kind of London lifestyle that most people hanker after. But it seems like increasingly it's the reality that anyone other than the very wealthy will have to learn to live with.