Britain’s most expensive property markets are set to be the most immune to a price crash in 2023, new analysis by the independent buying agents Garrington Property Finders has found.
Just one in eight residents of the London borough of Kensington and Chelsea has a mortgage on their home, meaning most will be unaffected by the spike in interest rates which the Financial Conduct Authority predicts could push 770,000 households into mortgage arrears over the next two years.
Garrington’s analysis shows that 27.6% of households in Kensington and Chelsea own their home outright, and that levels of outstanding mortgage debt in the wealthy borough are exceptionally low, at just 7.3% of the total value of homes there.
Property in the borough – which includes two homes owned by Rishi Sunak – is the UK’s most expensive, with a median price of £1.4m in the year to June 2022, according to the Land Registry.
Jonathan Hopper, CEO of the buying agents Garrington Property Finders, said: “The property market is going through a rapid transition, but the biggest falls seen so far have been in transactions rather than prices.
“The most recent Land Registry data shows average prices paid across by the UK fell by just 0.3% in November.
“Nevertheless, the ripple effects will intensify over the coming months as rising interest rates feed through into homeowners’ monthly mortgage payments.
“But our research indicates some markets will be affected much more than others.
He added: “Prime London postcodes, as well as several popular university cities, are the most likely to escape relatively unscathed.
“Homeowners in these markets often have a good chunk of equity under their belts and are therefore more insulated from rising mortgage costs.
“Unlike much of the country, the three London boroughs in our ‘most resilient’ top 10 also saw prices fall last year, making them less prone to further correction now and thus an attractive proposition to buyers looking for stability.”
Britain’s most unaffordable property market – the London borough of Westminster, where the average home costs 15.6 times the average resident’s salary – comes second in the ranking, with the historic university cities of Oxford, York, Cambridge and Exeter all making the top 10.
The bottom of the table is dominated by more affordable areas popular with first-time buyers, where homeowners have much higher levels of mortgage debt as a percentage of the value of their homes.
First-time buyers account for one in 10 homeowners in Dartford in Kent, and 8% in 95th placed Milton Keynes.
Many of these markets also saw very rapid price rises following the pandemic – average prices in Milton Keynes jumped by 17.4% in the year to the end of November 2022 – which may now increase the likelihood of a correction.
Hopper continued: “By contrast, our research suggests that towns which saw very rapid post-pandemic price rises and lots of first-time buyers, such as Crawley and Milton Keynes, could be set for sharper price falls in 2023.
“For tactical buyers looking to secure a big discount, these more exposed areas could throw up some strong buying opportunities this year.”
