Commuting one hour can save £450,000 on house prices

Posted 29 September 2016 by Ben Salisbury

Homeowners prepared to sacrifice one hour each way to commute to London could save an average of £450,000 on the cost of a property...

By sacrificing two hours a day in commuting, London workers could save themselves up to £450,000 on the cost of a new home, according to new research from Lloyds Bank.

By living outside the city and commuting in each day, the price of an average property drops by 60% from £741,919 to £294,903 in commuter towns an hour outside of London.

Wellingborough, in Northamptonshire with excellent fast train connections to London St Pancras in just 52 minutes remains the most affordable commuter town where homes cost an average of £183,345 or 4.1 times the average annual earnings for zones 1 and 2 of £44,967. However, the house price to earnings ratio based on local average annual earnings is significantly higher at 5.5, as the average wage for those working in Wellingborough is £33,183.

After Wellingborough, the next most affordable commuter town is Peterborough in Cambridgeshire, with an average house price that is 4.2 times the average annual earnings in zones 1 and 2; followed by Kettering (4.3), Chatham (4.6) and Swindon (4.8). Commuters in the ten most affordable towns are earning, on average, over £10,000 more than they would in the town in which they live, £34,729.

Southend, Sittingbourne and Rugby have average house prices of £294,903 compared to the average of £741,919 for a property close to a job located in central London, zones 1 and 2. This is equivalent to a saving of £447,015 or 60% of the price of a property in central London.

Even taking into account the cost of an annual rail season ticket for a one hour daily commute each way, averaging £4,989, the commuter would have to make the same journey for 89 years for the total commuting cost to wipe out the saving in house prices.

Even reducing the commuting time and living closer to London, there is still a huge saving to be made on property prices. Commuters who live approximately 40 minutes outside of central London, including Hatfield, Billericay, Orpington and Reading, could save 48% (£353,000) outside of the city, with their average house price £389,000 and with a lower average annual rail pass cost at £3,534.

And just 20 minutes away from central London could benefit too. Commuter towns like Ilford, Borehamwood and Elstree have house prices that cost on average nearly £297,795 lower than in central London.

Areas which buck the London trend

There are some areas used by London commuters that don’t follow this trend and command higher property prices than the average in central London. Commuters from Beaconsfield pay an average of £996,113 and also have to pay an annual season ticket cost of £3,324.

Commuters from Gerrards Cross pay on average £822,363 and £3,328 for an annual season ticket, those from Wimbledon pay £762,957 and a season ticket price of £1,520. In Weybridge homes cost £760,335 and a season ticket costs £3,624 and in Harpenden it’s £747,602 and £4,432.

Where living in the City is more cost effective

However, in other major English cities such as Manchester and Birmingham, it’s cheaper to live in the city than outside.

In Birmingham, the second largest city in England, the average house price is around £172,000, but a number of towns within 40 minutes commute actually cost more than a home in Birmingham city centre, including Derby, Coventry, Burton on Trent and Leamington Spa which have an average house price of £211,661. Commuters from these towns also have to pay almost £2,221, on average, for an annual rail pass.

It is a similar situation in Manchester where towns such as Warrington, Chorley, and Macclesfield, all about 40 minutes away from the city centre by train have an average house price of £204,161, compared to £162,214 in England’s third largest city.

Andrew Mason, Lloyds Bank Mortgage products director, commented: “Commuters to London who don’t mind a longer journey between home and work could reap the financial benefits of living outside of the capital.

“However the decision of whether to live in the city or further away is not simply a trade-off between financial costs and journey times. Quality of life is also a major factor: family circumstances, better schools, physical environment and homes that offer better value for money also come into the equation.

“That explains why, especially outside London, commuters are often prepared to pay a premium to commute when they could be better off in purely financial terms living closer to their place of work.”

Commuter town costs in Scotland

Meanwhile, analysis from the Bank of Scotland found house prices in towns within an hour’s commute of Aberdeen, Edinburgh and Glasgow showed that Motherwell, Greenock and Arbroath are Scotland’s most affordable commuter towns.

Motherwell was the most affordable commuter town to Edinburgh, with an average house price of £130,268 compared to £225,133 in the capital. Greenock was the most affordable town within an hour of Glasgow, with an average house price of £120,927 compared to the Glasgow’s £161,623 and Arbroath was the best value for commuters travelling to Aberdeen, with an average house price of £127,497 compared to £210,522 in Aberdeen.

Read here if "Commuting to London from Kent makes financial sense"

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