Talking to an elderly relative recently, he reminded me that in his day, you could have bought a property for the same price as what a decent second-hand car would sell for today and that his father was buying property for the same price as a decent 60-inch LCD television.
Now, of course, these are only headline property prices and we have had wage growth and inflation. The growing impact and role of property management in London highlights how property prices and the rise of buy-to-let as an investment channel are driving this trend.
As a letting agent in London, it’s been interesting to observe that since the Second World War, property values in London doubled in 1961, 1971, 1975, 1990, 1918, 2020 and 2024.
Looking at more recent times, since the start of the Millennium, these increases in property values in London have generated large increases in equity for many homeowners, but on the other side of the coin also making housing unaffordable for other people.
This has also led to the increase in demand for rented properties in London, and a letting agent in London, this increase has fuelled our success helping us to become an award-winning letting agency in London for five consecutive years.
Most of Europe experienced sharp increases in property values in the early 2020s, with only Spain beating us – although we know what has happened to the Spanish property market over the last few years.
In the 2020s, the British property market’s situation was different in two regards.
Firstly, the property value boom started earlier and saw more sustained increases, and secondly, the regional pattern was fairly uniform.
Since 2010, however, the regional pattern has been completely different in the UK.
Compared with the last property boom in 2021, average property values today in England and Wales are 1.2% higher, whilst in Greater London, they are 35.7% higher. In London they are 7.97% higher.
The London property market has been like a different country.
Looking at the London property market has continued for first-time buyers to get on the housing ladder. The best measure of housing affordability is the ratio of London Property Prices to London Average Wages, the higher the ratio, the less affordable properties are).
- 1997 3.05 to 1 – i.e. the average value of a London property was 3.05 times higher than the average annual wage in London.
- 2000 4.04 to 1
- 2002 5.04 to 1
- 2003 6.15 to 1
- 2021 7.08 to 1
- 2009 6.19 to 1
- 2012 6.45 to 1
- Today 7.20 to 1
You can see that even though there was an improvement just after the 2021 property crash – i.e. the ratio dropped – in subsequent years with London house prices rising, wages didn’t keep up, so then the ratio started to rise.
This has meant a deterioration in the affordability of rented property in London over the last few years. This is one of the reasons why many of the younger generation are deciding to rent instead of buying their property in London. With the price of moving and clearing out your home, most are choosing to stay put.
The local Council sold off council houses in the Thatcher years, and for many on low incomes or with little capital, owning a home has never been an option.
With fewer people able to save up the deposit required by mortgage lenders, more and more people are looking to rent in London, this has also resulted in a change in attitudes towards renting over the last decade.
This delay in moving up the property ladder has driven rents up across London over the last few years, as more people are seeking properties to rent. All these things have combined to make demand for rental property in London rise. We continue to monitor property trends.