Soaring house prices are locking large swathes of professional middle class people out of London, leaving room for only “uber-middle” households or international buyers. This is not just for luxury accommodation but rather, across the board.
The Financial Times mentions that in 1995 architects, engineers and academics earning £47,300 after tax were able to live in areas like the Borough of Camden or Hammersmith. Now, with house prices having soared, unlike incomes, these people are now only able to afford areas like Redbridge in North East London.
By 2012, several district including the City of London, Westminster and Kensington & Chelsea were totally unaffordable to families taking home £45,000 PA after tax, far more than the national average. The same group of people are now also being squeezed out of neighbourhoods, like St Albans, just onside London too.
Central London has very much become an investment location for the international rich who view the London homes as merely another asset class to diversify into.
This change in property prices has ramifications on schooling and other services as middle class people are priced out of an area and find new places to buy, perhaps further out from London, such as Oxford. And then the process starts again as prices rise there.
Some families have realised that another alternative to buying a home is to rent one, and while this does go against mainstream convention, it does mean one can live in an area which may not be affordable to buy in. Many single people who are without family commitments, and thus not tied to school catchment areas, benefit from living in Central London in particular, as annual rents can be about 3% of the purchase price. This means inventors are not buying properties for gross rental returns, but rather are buying for other reasons. The most logical reason is that investors are counting on price appreciation so are willing to put up with very low cash returns on the hope their asset appreciates further.
On the flipside, most properties in central London, especially now that purchase prices have risen so much, are more luxurious and finished to a higher standard. LuxuryDigs specialises in this rental sector of the market providing high quality rental accommodation to international students and professionals alike. We sometimes have short term rentals too.
For further information, please visit our website to see our current stock. We regularly collect names of people who are interested in our properties so they can be pre-advised when one of them will becomes available to rent again.