An interesting item on Dave Hills London Blog.
Something isn’t right about the London house price narrative that’s enjoyed such favour in these parts lately. It began with a New York Times article two weeks ago in which an ex-pat Londoner mourned the departure of two neighbouring households for other parts of the UK, in each case blaming the capital’s insane property price. This was described as part of a trend. But my first reaction was: “what’s new?”
London’s population is rising fast – driven primarily by birthrate – yet for years it’s been the case that large numbers of people have moved out of the capital and into home ownership in other parts of the country. A 2010 GLA report found that between 2001 and 2009 no less than 2.1 million departed for different locations in these islands, with most moving into owner-occupation – London property was too expensive. The size of the outflow actually fell during 2007-09 as mortgages became harder to get.
Meanwhile, across the rest of inner and the whole of outer London, the vast majority of home-buyers in the past two years have been UK nationals. Also, overseas buyers of homes in London aren’t all super-rich. “This is not the jet-set but rather the working middle classes expanding into the world, often for the first time,” said a Knight Frank representative recently of purchasers from Malaysia, Singapore and Hong Kong.
Londoners themselves are probably part of the reason prices continue to soar. One housing market expert suspects that what he calls “this crazy boom” is being further fuelled by a kind of panic-buying among people with savings, wealthy relatives or equity in existing homes who fear that the market is spiraling beyond their means forever. He predicts that this now-or-never part of the “feeding frenzy” will continue until everyone who can get their hands on the necessary cash has sunk it into their pile of bricks and mortar.
Comment It may well be that it is not just wealthy foreign investors buying up properties but:
- Wealthy buyers certainly have an impact, it is not just the numbers it’s the funds they have! One buyer with £1 million pounds has the same impact as five buyers with £200,00!
- As higher prices properties rise in value all other property values move up!
- More people in London – a lot of policy makers think that’s a great idea – hardly surprising there is an impact on housing!
- Londoners moving out to other parts of the UK are able to bid up prices in those areas as they often have additional funds (obtained from higher London house prices), thus spreading the problem far and wide.
What should be done?
Abandon the idea that increasing the population is a brilliant idea – it’s not sustainable!
Change the planning rules to restrict the growth of the luxury market.
Restrict purchases to people who actually need to live in London rather than to those who seek to benefit from higher property prices!