Young buyers are being priced out of global city property

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1 Prime property Young buyers are being priced out of global city property Median age in London, New York, Sydney and Hong Kong ticks upwards George Hammond YESTERDAY For centuries, great cities have lured the young and ambitious in search of streets paved with gold. Now those city streets seem more likely to appeal to the silver-haired as young people either flee or shun the increasingly unaffordable property prices. London has traditionally imported the young and exported the old, says UK housing market analyst Neal Hudson. But this equation is in danger of reversing. The city is getting older and fast. Having not shifted meaningfully between 2001 and 2011, the average age of a Londoner rose by a full year between 2011 and 2016 the latest date that figures are available according to the Office for National Statistics. It s a similar story in other global cities, where house price rises have outstripped the wider economy: the average age of a New Yorker increased by more than eight months between 2011 and 2016; in Hong Kong, it went up almost two years over the same period, to well over 43. Improved healthcare and lifestyle, and a small dip in birth rates have all had a role in pushing up the average age, but there is also evidence of a demographic perfect storm, as young people look to other regions and older residents stay put. In London, the net inflow of people aged from elsewhere in England and Wales fell almost a third between 2014 and 2016, while the net outflow of 30 to 34-year-olds increased every year from 2009 to 2016, rising from 6,615 to almost 17,000, according to data from the Office for National Statistics. At the same time as it was haemorrhaging its young, London retained its old: the population of 55 to 64-year-olds grew almost 12 per cent in the five years to June 2016, more than eight times the rate seen across the rest of the UK, according to the ONS. Page 1 of 12

2 Where once older homeowners might have departed for a comfortable retirement outside the capital, many are now staying put because the cost of moving is so vast, according to Mike Bickerton at Cushman & Wakefield, the estate agent. People are sitting out the storm. Instead of paying stamp duty you could put a fairly substantial extension on your house, he says. Page 2 of 12

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6 Beyond encouraging older owners to stay, housing market dynamics might be deterring young buyers from cities. The average deposit for a first-time buyer in London is, at 93,139, almost four times the UK average, according to data compiled by Savills. Imagine that to live in London you had to buy a 500,000 permit. With prices as they are, that s effectively what we ve got, says John Myers, co-founder of London YIMBY, a campaign group for more homes. London has traditionally imported the young and exported the old but this is in danger of reversing New York s market is similarly hostile: the typical price of a home increased by 62 per cent in Page 6 of 12

7 the five years to 2017, according to Savills, and is now 8.5 times the median income, according to Demographia. That s some way better than Hong Kong, however, where nominal prices have risen 45 per cent to 19.4 times the median income. Even in those areas which have long been a magnet for young people, affordability has been stretched to breaking point. In Shoreditch, an east London neighbourhood whose journey from grubby industrial district to hipster hotspot has been well documented, a one-bedroom apartment in The Stage, a development of 412 high-end homes by Galliard Homes, is being marketed off-plan for 910,000. One and two-bedroom flats in The Quadra, London Fields, range from 499,950 to 679,950 In Williamsburg in Brooklyn, warehouses that once housed artists studios are now more often studio apartments. A two-bedroom penthouse in Warehouse 11 is on the market for $1.575m with Keller Williams, having changed hands in 2010 for $718,000. Near the Williamsburg bridge, Lior Barak of Compass real estate is selling a two-bedroom condo for $1.395m. Surry Hills, recently described by Time Out as Sydney s buzziest and most happening burb, has a median price close to A$1.5m (US$1.2m) for two-bedroom houses, according to realestate.com.au. Two-bedroom apartments at the Golf House development range from A$1.65m to A$2.37m, available through Savills. In Hong Kong, where there are more people aged between 50 and 59 than in any other 10- year cohort, housing the elderly is a high priority. Tanner Hill the first non-subsidised, lifelong rental development for the over-60s opened in 2015, with the cost of an apartment varying based on the applicant s age. A 660 sq ft unit in the development will cost a 60-year Page 7 of 12

8 old HK$7.1m, but is on offer for less than half that, HK$3.2m, to any 85-year-old tenant. These world cities may be ageing at different rates to one another, but they re all landlimited, says Yolande Barnes, head of world research at Savills. There s not much space for new buildings, so you have a scarce asset and high demand it s the young people without equity who can t compete with that. Two-bedroom apartments in Golf House, Sydney, start at A$1.65m Living room of a Golf House apartment, Sydney As high-end residences for older people pop up in trendy districts, and affordability is further stretched, younger buyers are looking to the cheaper city peripheries. In London, the only Page 8 of 12

9 three boroughs that saw average ages come down between 2011 and 2016 make up London s eastern frontier: Havering to the north, Bromley to the south and Bexley between. The Quadra, on London Fields, is pitched at downsizers aged 55 or above, with a two-bedroom apartment on the market for 600,000 with Currell. The building sits in the borough of Hackney, where the average age crept up by almost 18 months between 2011 and Across town, expensive boroughs in west and central London are ageing fastest. The average age in both Hammersmith & Fulham and Ealing increased by 23 months across the five years while in Kensington and Chelsea, London s most expensive borough, it went up by 28 months over the same period. As the tide of young buyers has pushed into fringe neighbourhoods, so prices have risen there too. Amy Scammell-Webb, an estate agent in Havering, reports an influx of young househunters from central London. The arrivals have had an impact on the borough s average age, which has fallen by 14 months from 2011 to 2016, and on prices, which have risen 53 per cent to 339,000 in the same period, according to Land Registry data. The same pattern can be seen in New York, says Garrett Derderian, director of data and reporting at Stribling & Associates. Most young people have been priced out of Manhattan and many parts of Brooklyn. While we have seen many young people relocate to Queens, especially to Long Island City and Astoria, these areas have started to become costprohibitive, he says. Corner of Bedford and 7th Street in New York s Brooklyn Nicolas McComber/Getty Images Page 9 of 12

10 Two-bedroom apartment in Williamsburg, New York, $1.395m Richard Caplan As a result, many young buyers are considering other cities. In London, the population of 25 to 34-year-olds grew by 2.9 per cent in the five years to June 2016, lower than every other UK region except the south-east. In Edinburgh and Glasgow the number of 25 to 34-year- olds increased 17 per cent; in Newcastle 18 per cent; and in Exeter 26 per cent, according to data compiled by Savills. In other cities, too, priced-out creative millennials are finding alternatives, says Barnes. In Sydney, they re either going to new settlements like Parramatta or to alternative cities like Newcastle [in New South Wales]. In New York you have people moving upstate, to places like Ithaca. With London s population skewing towards older generations, there are concerns about the city s ability to sustain the commerce and culture that made it such a magnet in the first place. If young workers continue to move elsewhere, that would have implications on [London s] ability to attract high-skilled business, says Paul Swinney, head of policy and research at the Centre for Cities, the think-tank. Skilled migrants from the EU might once have taken up the slack, but they too are a diminishing group. The ONS reports that the number of people coming to work in the UK in the year to September 2017 was down 45,000 on the year before. Page 10 of 12

11 Hong Kong s Victoria Harbour Getty An elderly woman and young boy in Hong Kong Philippe Lopez/AFP/Getty Images The same fears abound in Hong Kong, where a lack of affordability risks jeopardising efforts to attract younger workers, according to Liam Bailey, global head of research at Knight Frank. The provision of affordable housing within the territory is critical, he says. Extra provision may be required in Hong Kong, where prices continue a steady hike upwards but, elsewhere, markets are cooling. In London, two-fifths of postcodes are seeing price falls; in the New York boroughs of Manhattan and Brooklyn, apartment sales are down on last year; and in Sydney, prices cooled in March for the seventh month. Global city prices hit a high plateau, and there s nowhere further they can go, says Barnes. Page 11 of 12

12 Eventually, the price falls might tempt younger buyers back. In the meantime, other cities are benefiting, says Barnes. The rationale is simple, she adds: If I live in London, I can work and pay my rent. If I live in Glasgow, I can work, pay my rent, and live. on Twitter to find out about our latest stories first. Subscribe to FT Life on YouTube for the latest FT Weekend videos Global prime property calculator How much prime residential property could you buy in the world s priciest cities? Copyright The Financial Times Limited All rights reserved. Page 12 of 12