According to data from London Central Portfolio (LCP), the number of housing transactions in Greater London in the year to July fell to just 88,189 – a level not seen since pre-2009.
This is down by almost 20,000 transactions from the 2014 peak.
The 6.5% fall in all residential transactions was even more marked in the new build sector, where just 14,602 purchases were made, a fall of 12.1% year-on-year.
The prime central London market was also hit hard with annual transactions falling 8.3% to 3,831, again a level not seen since the financial crisis.
Prime new build was the worst hit market with transactions falling 25.3% across the year.
However, property prices in all markets held up well, however LCP noted there were a range of factors for this in the prime market as people were being forced to sell more expensive homes, often at a discount – bringing up average values but meaning real values were falling.
New build properties, despite their significant fall in transaction numbers, maintained a 90% premium in prime areas and a 32% premium across the rest of the capital.
In contrast, data from Hamptons International found that Londoners bought more than 30,000 homes outside the capital in the first half of 2018, 16% more than the same period last year.
While the south of England remained popular, the search to find cheaper properties or better value is pushing more buyers to look further away from the capital.
Two out of five (38%) London leavers moved to the South East, but this is down 3% compared to H1 2017 as affordability tightens.
The East of England is the next most popular destination with 30% of London leavers moving to the region and one in every six homes sold in the region sold to a London leaver (16%).
However, as more people are priced out of the South, the proportion of Londoners leaving for Northern England or the Midlands has more than tripled since 2008.
In H1 2018, one in five London leavers moved to the North or Midlands (21%), up from just 6% a decade ago.
The average Londoner buying outside the capital spent £424,610 on their new home, 1.6 times more than a buyer from elsewhere.
Hamptons International research analyst Aneisha Beveridge said affordability was pushing more Londoners to move out of the capital.
“The proportion of London leavers heading North has tripled in the last 10 years,” she said.
“More people are making a bigger move and buying a larger home sooner to avoid having to pay stamp duty on additional moves as they trade up. But for many, this means heading further North.
“However, more first-time buyers are staying in the capital to purchase their first home than last year. The savings from stamp duty relief and the availability of Help to Buy has meant that more first-time buyers are able to remain in London than before.
“But raising a deposit remains a hurdle for many, which helps explain why increasing numbers of first-time buyers who leave London are heading North.”
Few cause for optimism
Overall, LCP CEO Naomi Heaton felt there was little to be cheerful about the UK property market.
“There are very few causes for optimism in the domestic property market, where real terms, inflation-adjusted, house prices are no higher than they were in 2007,” she said.
“Affordability remains heavily constrained in a post-Mortgage Market Review world, where wage growth struggles to out-pace inflation. Artificial stimulation of the market through Help to Buy and first-time buyer incentives has supported the market but there is a general reticence among up and down-sizers to commit at this point.
“The continued lack of a defined exit plan from the European Union, combined with economic uncertainty and a number of punitive tax changes targeting the buy-to-let sector, have caused the market to stagnate,” she added.