- Buyers priced out of center may move to Manchester, Edinburgh
- Average London home now costs $940,000 after 10% annual surge
The price of homes in central London will stagnate next year as prospective buyers priced out of the U.K. capital look for property farther afield, Rightmove Plc predicted.
Asking prices in outer London will rise 6 percent, creating a 3 percent gain across the capital, the property-website operator said in a report published on Monday. Prices in London fell 0.5 percent this month, compared with a 1.1 percent drop nationwide.
A home in London now costs 616,548 pounds ($940,000) on average, 20 times the average salary of 30,821 pounds, after prices jumped almost 10 percent over the past year.
“2016 may be the year when many young urban professionals finally give up on the London market” and move to cities such as Manchester in northwest England and Edinburgh in Scotland, said Alasdair Rae, a University of Sheffield professor who analyzed the data for Rightmove. “They are already very popular and pricey because of what they offer, but may seem cheap to London emigres priced out of the capital.”
U.K. asking prices rose an annual 7.4 percent in December amid a continuing shortage of homes for sale, according to Rightmove. The number of prospective buyers making inquiries at real-estate agencies rose 37 percent in the fourth quarter from a year earlier, while the number of properties coming to market fell 5 percent.
Asking prices usually fall in December, but the drop across the country was the smallest for the month since 2006. All 10 regions tracked by Rightmove posted declines, led by a 3.6 percent drop in Wales.
In London, the borough of Camden was the best performer, with a 15.3 percent increase from November. The biggest drop was in the City of Westminster, which fell 8.5 percent.
Describing housing as “a perennial British challenge,” Chancellor of the Exchequer George Osborne pledged financial incentives to spur homebuilding last month and said he’s increasing a tax on purchasing properties for rental and second homes in a bid to reduce competition for first-time buyers.
While a pickup in wages this year helped affordability measures, there might not be much further improvement. Bank of England Deputy Governor Minouche Shafik said Monday that gains may have leveled off, while data due to be published on Wednesday may show basic pay growth cooled to 2.3 percent in the three months to October.
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“Whilst initiatives are in place to encourage developers to build more new homes to supplement the supply of existing ones coming to market, the lead times are long and developers face capacity constraints,” said Miles Shipside, commercial director of Rightmove.