For the equity-derivatives broker Andrew Adamson, it was a trade too good to pass up.
In October, he was offered £1,000 (Dh6,180) per square foot for his London townhouse. Other homes in the area were going for about 30 per cent less. Adamson accepted it immediately.
London’s housing market, having outperformed the rest of the UK with price gains of more than 50 per cent in five years, is cooling as owners such as Mr Adamson cash out. They are leaving the city for less-costly suburban and country homes because they expect mortgage rates to rise and new lending rules to dampen prices. London estate agents had the largest increase in instructions to sell homes in Britain in June and the biggest drop in people seeking to buy them, according to the Royal Institution of Chartered Surveyors.
“Now is the time people are cashing in,” said Mr Adamson, 46, who used the £2 million he raised from the sale to buy a country manor in Hampshire, southern England, for £400,000 less. “I caught it before everybody else started talking about it. As soon as everybody starts talking about it you’ve missed the best deal.”
There has never been a stronger financial incentive for Londoners to leave the city. The average price gap between homes within the M25 motorway that encircles London and the rest of England was about £265,000 as of June, the widest on record, according to data compiled by the broker Hamptons International.
A growing number of people are exploiting that price difference. Londoners purchased 75 per cent more properties outside the capital than a year earlier, bringing the total for the 12 months through May to 44,000 properties with a combined value of £15 billion, Hamptons estimates. Both numbers are the highest since 2007.
“There’s an opportunity to take advantage of a nice bull run” in London prices since 2009, said Adam Challis, the head of residential research at Jones Lang LaSalle in London. “The next real strength in terms of pricing is clearly in suburban locations and into the commuter belt, where there’s still quite a lot of heat in the market.”
London house prices stagnated in July compared with the prior month, the first time there had been no growth since December 2012, according to a survey of real estate surveyors published by Hometrack on July 25. The group expects London values to fall in the months ahead, the results showed.
UK prices grew at the slowest pace in more than a year last month, increasing 0.1 per cent from June, Nationwide Building Society said.
“If you want to crystallise your gains, this is no bad point,” said Simon Rubinsohn, the chief economist at RICS.
The Bank of England governor, Mark Carney, this year announced a loan-to-income cap and an affordability test in an effort to rein in runaway prices. Starting in October, no more than 15 per cent of mortgages granted by UK lenders should amount to 4.5 times the borrowers’ income. Additionally, homebuyers will have to prove they can afford to repay their loans if interest rates increase.
The BOE should be ready to further tighten these curbs and may need to consider raising rates if the moves fail to control housing market risks, the International Monetary Fund said last month.
The BOE measures have “made people think, ‘Wait a minute, prices have gone up heftily already, perhaps we don’t need to chase them upward further’,” Mr Rubinsohn said.
Asking prices for London properties declined for a second month in July as more homes were offered for sale, according to Rightmove. The decline was led by three districts – Islington, Wandsworth and Kingston. Prices in each fell by an average of almost 4 per cent in the month.
“It’s as if someone had flicked a light switch,” said Johnny Morris, the head of research at Hamptons. “There are a number of new worries, including higher borrowing costs and mortgage regulations.”
For Mr Adamson, moving from central London to the Hampshire village of Catherington was also a lifestyle choice. His commute by rail to London’s Waterloo station takes about an hour. And within 15 minutes of his new home, he can kite-surf in the English Channel.
“It’s about the quality of life,” said Mr Adamson. “I can even see the Isle of Wight.”
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