New research from property consultant Cluttons reveals that over the next five years the future increases in South East house prices, which are above rises in real incomes, are set to force anxious first time buyers away from the region in search of their first property.
While such an influx may come as good news for other regional economies, this movement could potentially dampen London’s economic growth and create a ‘Brain Drain’ for the South East – Businesses could face the challenge of substantial workforce losses when their staff move elsewhere, which in turn may cause firms to opt for alternative global locations to base their operations where housing is less of a financial burden.
Other key findings:
– More than two thirds of people (72%) believe that house prices in London and the South East will rise more than earnings over the next decade – Over a third (35%) of people renting are concerned they need to buy before prices rise any further – Average person renting believes it will take 8.5 years before they will be in a position to buy a home – 72% of people feel that home ownership would provide greater security over their housing situation – Four fifths of people (80%) want to buy a property because they think it is a good investment for the future The research was revealed at a seminar hosted by Cluttons at The Soho Hotel in London on Thursday 3rd October, attended by leading industry figures and housing sector analysts including: Greg B Davies, Head of Behavioural and Quantitative Investment Philosophy at Barclays Wealth and Investment Management
Sue Foxley, Head of Cluttons research said, “With significant house price inflation in the South East above rises in real incomes, many aspiring homeowners are effectively being priced out of the region as they search for more affordable homes. Anxiety over future price rises is one of the primary emotional drivers for those seeking to get onto the first rung of the housing ladder, who are subsequently looking elsewhere for their first property. Inevitably this will have a positive ripple effect on the rest of the UK – as people move further out, thereby creating more demand in surrounding cities.
“However, this mind-set must also be set against the growth implications for the London and South East economies. Employers may find themselves paying more to keep certain staff and attract them back into the region. Others may simply look to move their operations to a more suitable location where the provision of housing is less of a financial constraint, which would undoubtedly prove detrimental to the Capital’s and surrounding area’s economic growth”.
The head and heart of home buying – why, where, when The research and seminar hosted by Cluttons also looked at the emotional factors underpinning home buying, as well as the changing life circumstances which necessitate such movement. Practical issues of space and life events are primary drivers of the ‘why’ – but it is the anxiety over pricing and concern around security that often underpins the ‘when’.
– Buying as a couple and need for more space were stated by 22% and 12% of people respectively as motivation for buying a home.
– Over a third (35%) of prospective homeowners actively looking to buy are concerned they need to do so before prices rise any further
– 72% if people feel that home ownership would provide greater security over their housing situation In addition to these pragmatic reasons, the research by Cluttons also underlines the emotional or ‘human response’ across all demographics in seeking control over housing and being able to create a personal connection with one’s space – 74% stated that a key benefit of owning a home is the element of personalisation.
The findings therefore demonstrate a continued overwhelming desire for homeownership, but the market forces that propel such behaviour continue to present dilemmas and challenges not only for the house building industry but also the wider economy in London and the South East.
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