First-time buyers fleeing London do so at their own risk

Have high house prices succeeded where decades of government efforts at regional development have failed? That is, have they managed to redistribute economic development around the country? 

According to the estate agent Hamptons, nearly one in three buyers looking to move out of London in the first six months of this year was a first time buyer. It means that the traditional migration – move to London upon graduation, buy a first home in the capital and then possibly move out to the countryside when rearing a family – has been disturbed. 

Buyers are no longer bothering with the London stage of property-ownership, and are moving out of the city in order to buy their first home. They are not just moving to the traditional commuter belt, the estate agent adds, but jumping well beyond it to places such as Leeds.

It should hardly come as a surprise. Why would you want to sink all your capital into a small, leasehold flat with all the problems that form of ownership brings with it, when you could invest in a freehold house instead? The growth of working from home, along with flexible working, allowing perhaps one or two days a week in the office, has changed the whole pattern of home-ownership.

It is also helping to achieve something which the government has been trying to do, but failing, for many years. Every well-paid professional who relocates from London to the provinces helps to redistribute wealth around the country. Previous efforts in regional development policy have often succeeded in relocating public sector jobs around the country, but not private sector ones.

It is a trend, however, of which we should be very wary. While it might make good sense for homebuyers to switch their property search from London to country, that does not necessarily mean that global companies are going to want to switch their investment outside London.

If you are a Californian tech company looking to establish a European headquarters, your decision may well be between London, Paris and Berlin. Leeds may not feature so highly on your radar – nor are you necessarily going to entertain the idea of your staff only turning up at your London office twice a week. 

A survey last year by the Centre for Economic Policy Research found that working from home has been embraced by UK workers rather more enthusiastically than those in other European countries. As many companies ditch working from home and demand that staff return full-time to the office, this presents a potential danger for inward-investment into the UK.

It might look clever now ditching a pokey London flat for a spacious house in Leeds. But first-time buyers moving out of the capital are putting themselves at the mercy of working practices which were introduced as an emergency measure during the pandemic and may be switched back at any moment.