ULEZ house prices: New ‘tax attack’ could hit London house prices

The latest research by London lettings and estate agent, Benham and Reeves, reveals that ULEZ is starting to hurt house prices as designated low-emissions zones fail to match wider London growth.

Benham and Reeves has analysed house price data in London boroughs that fell within the ULEZ boundary following phases 1 and 2 of the scheme’s rollout, how this compared to the performance of the London market and what it could mean for those boroughs due to be impacted with the phase 3 roll out.

The research shows that the initial ULEZ pilot scheme which launched in April 2019 and covered the existing Congestion Charge zone, had little impact on house prices.

While it did impact seven boroughs, the zone only marginally crept into six of them while fully engulfing just the City of London.

As a result, in the year that followed, house prices increased by 5.9% in ULEZ-impacted boroughs versus 1.4% growth across London as whole.

This price resilience can be attributed to the fact that homeowners were already accustomed to the Congestion Charge, not to mention the fact that personal car usage is less prevalent due to the dominance of public transport in this most central of boroughs.

However, the data shows that the second phase of ULEZ may have had a more negative impact on house prices. The impacted boroughs experienced an average price growth of 5.3% over the 12 months following October 2021 rollout, which this time fell short by -0.5% compared to the wider London performance of 5.7%.

In fact, nine of the 16 boroughs that fell within phase 2 of the ULEZ expansion failed to outperform the rate of house price growth seen across the wider London market over the year that followed.

Westminster was the worst hit borough, experiencing a -5% price drop between October 2021 and October 2022, while Kensington & Chelsea and Hammersmith & Fulham also experienced negative growth of -4.1% and -1.1% respectively.

Other boroughs to lag behind the wider London average include Wandsworth (3.3%), Camden (3.3%), Islington (3.3%), Lambeth (3.5%), Haringey (3.9%), and Lewisham (5.2%).

This historical data suggests that, with the full ULEZ expansion due in August, a subdued London market could see a further cool in the rate of house price growth over the year that follows as London living becomes that little bit more expensive thanks to Sadiq Khan.

Director of Benham and Reeves, Marc von Grundherr, commented:

“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 percent 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.

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.”

Average house price data sourced from UK House Price Index
ULEZ info and data sourced from London Gov (1) and (2), Intelligent Transport, TFL, and the BBC.