Why are returns on residential property falling in the UK?
The amount of money sellers are making from residential property in the UK has shrunk to its lowest level in a decade, as a years-long boom in house prices slows, according to new figures.
After years in which London property has delivered bumper returns for investors and homeowners, the slowdown has been felt most acutely in the Capital, according to estate agents Hamptons.
In 2024, 14 per cent of London sellers sold their property for less than they originally paid, the same share as in the North East. In 2016, that figure was just two per cent.
Most of the Londoners who sold their property at a loss last year were selling up in central London, and had bought the house within the last nine years, Hamptons found.
Property values in some areas of the capital, like Tower Hamlets, remain below 2016 levels, Aneisha Beveridge, Head of Research at Hamptons, explained.
“However, those who bought pre-2013 in the capital have seen much greater returns, outpacing inflation too,” Beveridge said.
The average homeowner sold their property in the capital last year for 121 per cent more than they paid 20 years ago, outperforming the England and Wales average of 83 per cent and inflation at 77 per cent.
Regional rebalancing?
While inflation and higher mortgage rates have affected returns across the UK, it’s likely that a significant slowdown in London over the last few years has distorted the national average.
In the wake of booming London house prices in the 2000s and 2010s, other regions in the UK have become more attractive, pushing buyers – particularly first-time buyers – to areas like Manchester.
Sellers in these areas have seen significant returns: House prices in Oldham, just outside of Manchester, rose 14.6 per cent last year to £250,546 – growth of £31,951 year on year. In neighbouring Bolton, house prices rose 12.9 per cent to £252,070.
“The high asking price for London properties [is] perhaps a reflection that the relatively high cost of properties is stretching affordability for buyers”, head of mortgages at Halifax, Amanda Bryden, said.
“[In the South east and London] slow growth is likely a consequence of the already-high property prices, relative to the national average,” she added.
Analysts are still in favour of London as a safe place to invest in property, suggesting that this period of low returns is primarily a cyclical change, and will pick up in the coming years.
With that in mind, some estate agents have suggested it’s the best time to buy in a decade.