Sadiq Khan’s Ultra Low Emission Zone (ULEZ) may have delivered cleaner air to the capital but it appears to have had the opposite effect on property values, according to research from London estate agent Benham and Reeves.

Last month Property Soup reported that latest data shows that vehicle emissions, including PM2.5 particles and nitrogen oxides, have dropped significantly in outer London since the ULEZ expansion, with PM2.5 emissions estimated to be 31% lower than they would have been without the scheme.

However, analysis of property prices suggests that homes in ULEZ-affected boroughs have underperformed compared to the wider London market.

HOUSE PRICES LAG BEHIND

Following the initial launch of ULEZ in April 2019, house prices across London grew by 9.2%. Yet in the seven boroughs first impacted – Camden, Westminster, Lambeth, Southwark, Islington, Hackney, and the City of London – growth has been limited to just 5.9%.

The trend continued as the scheme expanded. In October 2021, phase two of ULEZ extended to Hammersmith and Fulham, Haringey, Kensington and Chelsea, Lewisham, Newham, Tower Hamlets, Wandsworth, and Waltham Forest.

Over the following year, house prices in these boroughs rose by just 3.8%, compared with 6.4% across the wider London market.

Since then, London house prices have grown by a mere 1.7%, while homes in these expanded ULEZ zones have seen values fall by an average of 3.6%.

The latest ULEZ expansion in August 2023, which extended the scheme to all 32 boroughs, has followed a similar pattern. Over the past year, prices in these newly affected areas have risen by just 1%, compared with 1.8% across the capital.

DOUBLE-EDGED SWORD FOR HOMEOWNERS

Marc von Grundherr, Director of Benham and Reeves, acknowledged the benefits of ULEZ for air quality but said it has contributed to shifting buyer behaviour.

“The evidence suggests  the Ultra Low Emissions Zone has had a very positive impact on the capital’s air quality and this is certainly a positive.

“However, its implementation and expansion has been met with a great deal of controversy over the last five or so years, particularly by London homeowners who feel they have been further penalised financially for living within the capital,” he said.

HIGHER MORTGAGE RATES

And he added: “Whilst it hasn’t been a predominant factor, it has certainly contributed to more buyers being pushed from the inside out, as they look to reduce both the cost of buying and ongoing cost of living in the face of a far higher cost of living, not to mention higher mortgage rates.

“Many other cities around the world place a high importance on improving air quality and so whilst we’re certainly seeing a period of adjustment within the property market, in the long run, the ULEZ could well become a factor that attracts homebuyers, rather than deterring them.”