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Commuting ‘cheaper’ than buying close to work – but only if you live in London

This was my crowning glory at Thisismoney.co.uk. The press release came in and I spent hours going through the figures, making sure I’d got the data right for the piece, which was published first thing on the Saturday as the lead news story – lucky me.

Thanks, as always, to Thisismoney.co.uk for letting me print it.

Report suggests living outside London and commuting is cheaper for commuters.

Cost saving: Commuting into London is often much cheaper than living in the city

London workers are making big savings by commuting rather than living near work, according to a study looking at house prices.

But the same benefits are not seen around all other major cities.

Commuters living in Home Counties – an hour outside of London – own homes £375,000 cheaper than those in the city.

The study found that with a rail season ticket costing £4,400 a year, commuters from towns like Peterborough and Swindon could afford to travel to work in London for over 80 years with the savings they’ve made on their properties.

The average house price in Reading and Milton Keynes, half an hour outside London, is £275,000, while a property in Central London is £620,000.

Travellers from these locations have shorter journey times and cheaper rail tickets of around £3,100 a year. Their homes – and repayments – are typically 66 per cent lower.

 Residents in Wimbledon and other outer boroughs, only 15 minutes from the city centre, are paying on average £300,000 less for their accommodation, with commuting estimated at only £1,400 a year.

The study by mortgage lender Halifax does not take central London tube fare prices into account.

‘It’s no surprise, for London at least, that the longer your commute, the larger the difference in house prices,’ said Nitesh Patel, a housing economist at Halifax.

‘The decision to commute is not simply a trade-off between financial costs and journey times.’

Social factors such as better schools and quality of homes can explain why commuters would prefer to travel greater distances to get to work.

However, commuters living near other major cities in the UK do not always find the same pay-offs.

In Birmingham, the average cost of housing within the city is actually cheaper than in local towns 30 minutes away. Residents in these towns will be paying an extra £1,500 a year to commute on top of an extra £10,000 on their houses.

Of course, those who bought in the centre of London in previous decades are likely to have seen a bigger increase in the value of their home than those in the Home Counties, with those buyers getting an excellent return rather than pumping their hard-earned money into train fares.

The cost of rail travel is set to increase dramatically next year. This is due to changes in the way increases to train ticket fares are calculated.

Whereas previously fare increases were based on the Retail Price Index (RPI) measure of inflation, with train firms given leeway to add up to one per cent on top, from July this year, train companies are now allowed to add up to three per cent.

With the RPI inflation figure remaining at five per cent, commuters could see their transport costs soar up to eight per cent next year. But, because the rises can be calculated as an average across all fares, this means that some fares could skyrocket, whilst others remain relatively stable.

This week, the Transport Secretary, Philip Hammond, added his voice to the clamour, saying that trains have become a ‘rich man’s toy’, with some fares becoming ‘eye-wateringly’ expensive.

Stephen Joseph, chief executive of the charity Campaign for Better Transport, said: ‘Far from being simply “a rich man’s toy” trains are also vital for many of those on more moderate incomes who need to get to work.’

Original source: Thisismoney.co.uk

http://www.thisismoney.co.uk/money/mortgageshome/article-2038282/Commuting-cheaper-buying-close-work–live-London.html#ixzz1YgrDQVSB

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