Sadiq Khan’s Ulez plan will hammer London’s property prices

Landlords and property investors are being warned that a plan by the Mayor of London, Sadiq Khan, to introduce an Ultra-Low Emission Zone (Ulez) expansion could put the skids under house prices.

A study by London-based estate agents Benham and Reeves has found that the Ulez expansion is already putting a damper on property values.

The research examined house price data within the Ulez boundary across the first two phases of the scheme and compared it to the overall performance of the London housing market.

The findings indicate that the initial ULEZ pilot, launched in April 2019 and covering the existing Congestion Charge zone, had minimal impact on property values.

However, as the scheme expands, it seems that tighter regulations are starting to take a toll on house prices in affected boroughs.

‘Yet another tax attack from Sadiq Khan’

Marc von Grundherr, a director of Benham and Reeves, said: “Many Londoners rely on their cars to hold down jobs and care for their families, and yet another tax attack from Sadiq Khan will hit them financially at a time when millions are already struggling with the high cost of living.

“The figures show that Ulez-impacted boroughs have trailed the wider London market by around half a per cent when it comes to house price growth in the year following the Ulez rollout, which accounts to well over £2,000 on the average London home.”

He added: “When the scheme launches across the entirety of the capital, this could see London homeowners out of pocket by thousands of pounds and those in the most peripheral boroughs could be hit far harder.

“So not only do they face the cost of either paying this latest tax grab or replacing their car, but their property’s value could also be negatively impacted.”

Ulez scheme may lead to huge consequences for neighbourhoods

The ongoing growth of the Ulez scheme may lead to huge consequences for neighbourhoods slated to be affected by its phase 3 expansion, the estate agency says.

Homeowners and prospective buyers in these areas should prepare for fluctuations in property values and consider their options in London’s housing market.

During its initial stages, Ulez impacted seven boroughs, with six experiencing minor encroachment and the City of London being entirely enveloped.

Over the following year, house prices in Ulez-affected boroughs saw an increase of 5.9%, while London experienced a more modest growth of 1.4%.

Resilience of property prices in the initial stages of the Ulez

However, Benham and Reeves say that the resilience of property prices in the initial stages of the Ulez initiative can be linked to homeowners’ familiarity with the Congestion Charge and the prevalence of public transport in central boroughs, resulting in less personal car use.

But recent data suggests that the second phase of Ulez may be causing a more adverse effect on the housing market.

Following the October 2021 rollout, affected boroughs witnessed an average price growth of 5.3% over the subsequent 12 months.

This time, the increase lagged the broader London performance of 5.7% by -0.5%.

Ulez expansion led to a slowdown in house price

The second phase of the Ulez expansion led to a slowdown in house price growth for several London boroughs with nine out of the 16 boroughs being affected.

They underperformed compared to the overall London market in the year following the expansion.

Westminster bore the brunt of the impact, with a -5% price drop between October 2021 and October 2022.

Kensington and Chelsea, along with Hammersmith and Fulham, also faced negative growth, with declines of -4.1% and -1.1% respectively.

Other boroughs trailing behind the wider London average include Wandsworth, Camden, Islington, Lambeth, Haringey and Lewisham.

Now the estate agents say that with the full Ulez expansion set to take place in August, London’s housing market could experience a further cooling in house price growth rates.

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