Why London’s property prices are not ‘the right problem to have’

If the rise in property prices continues unchecked London will begin to lose businesses to cheaper cities.

If the rise in property prices continues unchecked London will begin to lose businesses to cheaper cities

These days Londoners can be certain of three things: death, taxes and soaring house prices. Yesterday morning, the Office for National Statistics (ONS) published another set of figures showing that London’s property boom shows no sign of abating.

The figures confirm what we already suspected – that house price inflation is London is dwarfing price rises for the rest of the country. But the disparity between London and the rest of England continues to amaze. While house price annual growth was 10.4 per cent in England in the past year (to April 2014), the figure for London was an eye watering 18.7 per cent.   

In an interview with Bloomberg this week, Boris Johnson told us he thinks that soaring property prices are “the right problem to have”. One suspects that low and middle incomes Londoners struggling to get on the property ladder would vehemently disagree with this assertion.

Indeed, opinion polling now shows that a majority of people do not believe the inexorable rise in house prices is positive. An Ipsos Mori poll for Inside Housing last November found that 57 per cent of respondents disagreed that rising house prices were a good thing.

Even amongst property owners, frustration is going that while they may have an asset that is burgeoning in value, their children can barely scrape together enough cash for a deposit.

Remarkably, in a nation famed for its home ownership obsession, the majority of Londoners no longer own their own home. Almost half (49.9 per cent) of Londoners own their own home (2011 figures), compared to 58.7 per cent ten years ago. Nationally the rate of home ownership stands at 64.4 per cent.

Meanwhile London’s housing market is being cannibalised by the private rented sector, where a full quarter of Londoners now reside.

The fact is that Boris Johnson is trying to pass his own failure off as some sort of success. In six years as Mayor he has failed to get a grip on London’s housing crisis. Last year just over 21,000 homes were completed in London, the lowest figure since the London Development Database, which records these figures, was established.

This is half the target in the Mayor’s new London Plan and well below the 49,000-62,000 homes per year that his own estimate of need says are necessary.

And what of the homes that are being built? Studio flats in the One Blackfriars skyscraper, not yet built, are already selling off-plan for in excess of £1 million.

This does not meet the housing needs of ordinary Londoners, but rather the financial demands of property speculators.

The housing crisis is not just a personal problem for those priced out of the market; it is a threat to London’s economic competitiveness. The cost of housing has overtaken transport on the list of business concerns for London.

If the rise in property prices continues unchecked then London will begin to lose businesses to cheaper cities both in the UK and abroad.

Tom Copley is London Assembly Labour Group Spokesperson on Housing

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