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Capital Markets, Financial

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Nomura rounds up markets’ biggest misses in 2016

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Categorized | Property

House prices speed up London exodus

Posted on November 20, 2016

An exodus of people in their 30s from London has accelerated over the past five years as rapidly rising house prices have pushed couples and families out of the capital.

The departures — to areas ranging from Cambridge to Canterbury — have been driven by house prices on average almost £250,000 cheaper than in London, according to estate agency Savills.

Because of factors such as births and international migration, London’s population continues to grow but if international migration is excluded, some 66,000 people in their 30s left London in 2015, according to a Savills analysis of figures from the Office for National Statistics. In 2009, the figure was 51,000.

Among people aged 35 to 39, the number leaving has risen 18 per cent in the past two years.

London house prices have risen 85 per cent since 2009, placing intense pressure on people living in the city and leaving people in their twenties as the only age group with net inward movement.

“We are seeing a major migration of London housing wealth into other markets,” said Lucian Cook, director of residential research at Savills.

The borough of Epsom and Ewell in Surrey receives the equivalent of almost 4 per cent of its population in the form of London leavers each year. But people have also been moving to areas outside the traditional commuter belt, such as Canterbury, about 62 miles away.

Mr Cook said leavers were divided into two groups: “More affluent people trading up for much more space compared with their London counterparts, and those driven by accessibility as they seek home ownership or lower rental costs.”

Popular destinations include wealthy areas such as south Buckinghamshire, where the average home costs £690,000, but also relatively cheap areas such as Thurrock in Essex, where the cost is £250,000.

In total, 283,000 people, or the equivalent of 3.2 per cent of the population, left London for elsewhere in the UK in the year to June 2015.

Those most likely to leave were based in Kingston upon Thames and Richmond upon Thames, close to the border with Surrey. The most loyal were the residents of wealthy Kensington & Chelsea and Westminster, who were least likely to leave.

However, Mr Cook said that uncertainty over the UK’s relationship with the EU after the Brexit vote would probably reduce the departures trend if house price growth slowed.

“I suspect there will be a bit more stickiness in the housing market as a result of uncertainty from the vote on the EU. But as and when we get greater economic certainty, I would expect it to be restored, because of the big value gap between London and the rest of the country.”

London leavers are helping to push up house prices in surrounding areas, leading the estate agency to predict faster price growth in some parts of south-east England, reversing the trends of recent years.

The group says London house prices will rise 11 per cent in the next five years, while those in eastern England are set to rise 19 per cent and in the south-east 17 per cent.

London’s population has continued to grow: it swelled by 6 per cent to 8.7m in the four years to mid-2015, according to ONS data. But this includes factors such as births, deaths and international migration.