London exodus weighs on house prices and rent Workers and renters flee London and San Francisco

London’s “brain drain” could hit salaries, rents and house prices as the capital faces an exodus on a scale not seen since the 1950s and 1960s.

The capital is facing consequences already experienced in global cities such as San Francisco where wages and property values have decreased.

Swathes of office workers have ditched London or plan to because of the pandemic.

The newfound freedom of working from home has driven Londoners away, and, according to Paul Swinney, of think tank Centre for Cities, it will be well- off white collar workers who are more likely to relocate.

What will the exodus mean for jobs, house prices and rents? Salaries are higher in the capital than elsewhere because traditionally that is where the most competitive jobs have been. Homes and rents also tend to be pricier.

“There’s definitely a chance that London wages will come down if employees no longer have to live near their work,” Mr Swinney said.

“Plus, if you can hire people from anywhere in the world, that opens up more competition for jobs.”

Adzuna, an online jobs board, is expecting real wages to fall in London next year but said a drop would affect the rest of the country, too. Housing wealth is already heading out of the capital. The number of Londoners wanting to buy a home outside the city was 27pc higher between May and October compared with the same period in 2019, according to Hamptons International, an estate agency. For homes worth £1m or more it was up by 86pc.

While nationally house prices rose 4pc in the 12 months to October, in London the increase was slower ( 2.7pc), according to property website Zoopla.

Rents in the capital have already fallen, by almost 4pc, while over the same period rents rose 2pc across the rest of Britain, according to Hamptons.

The agent said it expected prices and rents to fall in London in 2021, by about 1pc for sales and 2pc for rentals.

The situation is made worse by the fact London had only just recovered from a 30-year population slump that began after the Blitz and a post-war economic downturn. The situation became so desperate during the 1960s that the Government considered banning foreign job adverts. In 1991 the capital still had 790,000 fewer jobs and one million fewer people than in 1951, according to the Centre for Cities. Only in 2015 did the population of Greater London return to pre-war levels.

WALKING DOWN BY SAN FRANCISCO BAY Rival cities offer a view of what could

happen in London. San Francisco was already facing something of a brain drain pre- Covid because of its extortionately high living costs and taxes. Its Silicon Valley technology companies were already experimenting with a working from home culture.

This was accelerated by the pandemic and the city is ahead of London in its migration curve, said Mark Anderson, of Adzuna’s American office.

“People started to move out as they were commuting less often. Now they’re working from home indefinitely, they are looking to move even farther,” he said.

Mr Anderson warned that employers were likely to adjust pay for new hires if they no longer had to live in pricey Silicon Valley and that salary increases for current employees could slow too.

From January, employees of social media network Facebook could face a pay cut as wages will be adjusted based on local cost of living. Twitter, another social media site, also factors in an employee’s location when setting their salary.

House prices and rents started to suffer from migration out of the city from around 2018, according to Rainy Hake Austin of The Agency, an American estate agent.

Small falls have turned into large drops since the pandemic broke out, particularly for homes previously occupied by local tech workers.

“Sale prices for one-beds went down by about 25pc and more than 30pc for studios. Rents fell by a similar amount,” Ms Hake Austin said.

Average rents in San Francisco have slumped about 20pc from their 2015 peak and property prices some 12pc from their 2018 peak. Prices could continue to fall, potentially by up to 20pc in the next year, she predicted.

However, Ms Hake Austin said she was sure cities such as London and San Francisco could avoid an extended population slump: “They will reinvent themselves and in a few years people will come back.”

‘San Francisco and London will reinvent themselves and people will come back’

London’s population dived after the war