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Just how expensive is the London property market?

Every single news outlet in the UK is saying the same thing: London is in a property bubble. The capital is far too expensive. People are moving out of the city in their thousands. But just how expensive is the London property market compared to everywhere else in the UK?

The answer is: very. Defined by The Guardian as a metaphorical “citadel”, London truly is an anomaly, almost completely separate from the rest of the nation. It seems as if the city operates almost with its own economy, its own investments and its own agenda—the only thing London seems to share with the rest of the country is it’s time zone. However, this has been the story long ere this. With the majority of the country’s political power concentrated in London’s Whitehall, this has distorted the city beyond all recognition, forming a monopoly on the country’s wealth distribution, political prowess and economic growth.

But the landscape is changing. As the past decade led to London’s stranglehold on the UK growing ever stronger, prices in the capital spiralled well above national averages, and thus it came to a point where London became almost a separate economic entity. Such is the problem Londoners are facing now that wages have had to be significantly inflated for workers in London just to take into account the ever-growing cost of living in the capital, notwithstanding the skyrocketing cost of housing.

London has one of the most expensive property markets in the world, with rents growing at an unsustainable rate and house prices now exceeding £600,000 for the first time, over double the national average of £232,885. This has put the average cost of a home in London at a staggering 14 times average UK earnings. You’d think that Londoners would be buying lofty houses to match its equally lofty price-tag, but to add insult to injury for disillusioned London homebuyers, the cost of purchasing an apartment in the city centre tips the scales at a massive £18,871 per sqm. To put this into perspective, this is a staggering 595% more than in another major UK city—Manchester—where the same city centre apartment would come in at a much more manageable £2,715. This isn’t even the worst of it: The London property market is so out of control that even garages in London are selling for the price of a large manor house. A notable example was the selling of a Southwark parking garage in 2014 at auction, fetching over half a million pounds (£550,000).  

If this isn’t bad enough, renters have even bigger problems—research shows that renters in London have to pay on average 8% (£98) per month more than their homeowner counterparts. Coupled with the fact that Halifax has pitted the average deposit in London now at an eye-watering £91,409 (nearly three times the national average), it seems nigh-on impossible for people in London to get their foot on the property ladder.

Other considerations

However, the woes for Londoners do not end with the growing cost of renting or buying a property—the cost of living in general is far more expensive in the capital than anywhere else in the country. Even things like groceries, fuel, eating and drinking out, travel, and leisure activities have a significant premium attached, with residents of London having to pay a hefty price just for the privilege of living in such an overheated and vastly expensive hub. According to Numbeo, it is £1,690.30 cheaper per month to live in a city like Manchester than in London, which isn’t surprising when considering that rent is a massive 60.9% higher in the capital. Even things like everyday luxuries and even necessities come in at a much higher price, with an average restaurant meal and groceries include a London premium, of 14.5% and 12.5% respectively.

Also, it’s not just tenants and homeowners that are suffering the wrath of London’s unaffordability—landlords have also been hit hard with the capital’s vastly overheated prices. London has proved itself significantly less buoyant than other areas of the country in the wake of the new 3% Stamp Duty levy on all second homes and buy-to-let properties that came into effect on April 1st 2016, with research showing that the prime London market has stagnated significantly as investors are either adjusting to or altogether refusing to invest in the city, looking elsewhere for more affordable alternatives. And it’s not surprising why—if the average property in the capital was purchased for £600,000, this would mean that a landlord buying a property at this value would now be faced with a staggering tax bill of £38,000 (compared to the still-significant £20,000 even before the new Stamp Duty levy came into effect).

Although London has a higher national earnings average—£2,774, which is 32% higher than the UK monthly average—this still isn’t enough. Consider this: the Telegraph pits the average first-time buyer needing a minimum income of £41,000, yet in London they need nearly double this amount, at £77,000. Furthermore, Londoners have the lowest level of savings relative to annual gross earnings (22% compared to the UK average of 29%). Even the cost of running a property is significantly more expensive in London than anywhere else in the country at £12,094, a massive £2,500 above the UK average.

It’s no longer a question that London is an incredibly expensive city to live and invest. Given the exponential cost attached to London’s property market, it’s no surprise that investors in particular are looking further afield for new buy-to-let opportunities. And it seems the majority of investors have flocked to the North of England of late, especially in the wake of the Northern Powerhouse imitative launched by the Government set to empower the northern regions with autonomy over budgets, investments and infrastructure for the first time. By attempting to rebalance the economy away from the capital, the Northern Powerhouse has since empowered other major UK cities like Manchester, Liverpool and Leeds to invest in infrastructure that not only rivals the capital, but also is gaining recognition on a national and international scale. 

One such infrastructural investment in the heart of the Northern Powerhouse is MediaCityUK, a bespoke media and technology hub situated on Greater Manchester’s picturesque Salford Quays waterfront. What was once derelict land in a city overshadowed by its neighbouring city of Manchester is now a lynchpin of the UK's communication industry, with a world-renowned reputation as Europe’s first purpose-built media ‘city’. Two of the UK's largest broadcasters—the BBC and ITV—both call MediaCityUK home, having multi-million-pound studios on the site, which further cement’s the site’s stellar reputation. Seen as the catalyst for the Northern Powerhouse, MediaCityUK was arguably the first major infrastructural investment which both proved the north’s uncapped potential and which cemented the north as a viable—and crucially, affordable—alternative to London (a fact proved by both the BBC and ITV, who both relocated their offices from London in favour of MediaCityUK).

Given the popularity of Salford Quays as a new employment hub, it’s no wonder that young professionals are flocking to the area in their thousands, keen to live and work in such a dynamic area. X1 Media City is the newest addition to the ever-expanding Salford Quays landscape, providing over 1,000 luxury apartments to the area’s growing population of private rented tenants. The site has been met with insatiable investor demand, with Towers 1-3 fully sold out, which is why the fourth and final tower has now been released to the private investor market. Don’t miss out—enquire today!

Source: Knight Knox, 16-March-2017

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