In just two short years, house prices in London have skyrocketed into outer orbit, gaining 40 per cent between 2013 and 2015. Nowadays, the average deposit for a first-time buyer in the capital is £91,000, which is more than double the annual median income per household in Greater London (£39,100).
Yes, I concede that this frankly shocking growth is cause for concern but realistically, it’s only a symptom of Britain’s larger affliction: a lopsided economy where punters only bet on London. The issue is so pernicious, wrapped in layers and layers of false questions and short-sighted “fixes”, that one could be forgiven for getting caught up in the debate. A few lesser-known statistics are that apartment prices nationwide have risen by £1,000 each month on average since the 2008 crash and that median incomes across the UK are some 40 per cent lower than in the capital.
Abnormal house price growth was and is the logical conclusion of policies and decisions focusing wealth, growth, development, employment and revenue in one single spot. Because, even if London’s property market is an anomaly, price growth there is not – it is a natural response to health economic drivers like demographic and economic growth, enhanced infrastructure and unfulfilled construction capacity. What many don’t know is that the urban development plan by the Greater London Authority underestimates the city’s capacity for new homes despite the current housing crisis. Over the next decade, the GLA forecasts an additional 43,200 new dwellings per year, while an appraisal by Savills, a real estate services giant, reckons that the capital could actually fit triple that amount (circa 146,290 per year).
The fact of the matter is that economic development has benefitted London above anywhere else, an ill so deeply rooted that it even eclipses the “North-South” divide. Take Midsomer Norton for example, a quaint little ex-mining town nestled in the rolling hills of Somerset, just a 25-min drive from affluent Bath. About one in four locals here are employed by the printing industry, but over recent years, businesses have been emigrating in part due to poor transport links. It takes 50 minutes to reach Bath by bus via winding country roads, which is the only option since they closed the railway station exactly 50 years ago – making it difficult and expensive to move goods, thus run a business. Now the main street is home to a dozen charity shops and a handful of empty pubs.
Head North to Yorkshire, the hinterland of Britain, and on any given day of the week, the High Street, a haven for discount brands and bacon sarnies, is packed with unemployed youth and minors pushing prams. These are the descendants of now defunct Yorkshire miners. The city’s biggest source of pride, its steel industry, also teeters on the brink of extinction. Sheffield University, a World Top 100 academic centre, and Sheffield Hallam University, with their 50,000 students and urban rejuvenation plans are possibly the city’s only saving grace. Sadly, after graduation, there ain’t much to keep them there.
So while London deals with the problem of too much (ill-distributed) wealth, towns and cities from Essex to Inverness are dealing with underdevelopment, capital flight and insufficient infrastructure. According to gov.uk, 61 per cent of local authority districts contain at least one of the most deprived neighbourhoods in England – and if only that were all…
Unfortunately, the Stamp Duty hike on property over £1.5 million that targeted foreign buyers in London has backfired, despite appearances. On the one hand, it has tempered excess growth in the most expensive property segment: annual price growth in prime Central London slowed from 4.6 per cent in January 2015 to 1.2 per cent in January 2016 and there were 17 per cent less sales during the last six months of 2015 year-on-year. On the other, it has actually just shunted the problem downwards as affluent buyers (domestic and foreign) either choose cheaper property or another country.
I will reiterate, London’s property market is responding to “healthy” triggers and is not on the brink of “collapse” and even if it did, it would take it just a few years to emerge from the recalibration as usual. However, this rumour-mongering does serve the purpose of skirting the real debate on failed policies by governments past and present as well as the political elite’s competence in matters of unbiased governance.
Leigh Stewart is the international editor and expert contributor for Tranio.com, an online overseas property broker.