What Sky-High Prices Mean for Home Owners & Businesses
We all know how expensive it is to buy in London, with most people driven to renting or moving out into the commuter belt. What does this mean for the economy?
In recent years it has become clear that house prices are on the rise, much to the delight of sellers. London in particular has seen a dramatic increase in the prices of homes, with it cementing its reputations as the most expensive place to buy a property in the entire UK. In fact, a study this year found that a square metre of property in Kensington and Chelsea now costs almost £11,000, which is a staggering 13 times more than the same space in the cheapest area, Stanley in CountyDurham. So what does this dramatic upturn in property prices mean for London’s economic landscape?
The allure of London
London has always been a highly sought after place to live, with it not only being the capital city of England but the biggest business and financial hub in the country. People are keen to make their fortune in the Big Smoke, and demand for housing has shot up as a result. The shortage of homes in London means that there is not enough property to meet the demand, and houses are being sold at a premium as a result. While this does wonders for the reputation of London as the most desirable city to live in, it’s not so great for some. When it comes to social mobility and the capital’s economy, are these sky-rocketing prices a good thing? Let’s take a closer look.
The price you have to pay
It can be said for certain that buying a property in central London is an impossible feat for anyone less than a multi-millionaire. This is driving people out into Greater London and the suburbs, where it is more likely that they will be able to buy or even just rent a property. That means bad news for the city as it sheds its inhabitants – the diverse, multi-cultural and social mobile population are what drives the economy, as opposed to a millionaire who may use their London pad for only a fraction of the year. The average house price in London is now an astonishing 14 times that of the average wage, with this being driven by the aforementioned lack of new housing and the massive demand for it. To put things into perspective, you would need to be earning as much as £108,500 to fund an 80% mortgage on an average London home, which is way beyond the average wage of £33,000 – not to mention the many people who are earning below that.
A worry for businesses
Additionally, the cost of property in London is not just the concern of home-owners. It is now a huge business concern too, as companies need operating in the capital to be affordable if they are going to be able to employ the best staff. The worry is that if this rise in property prices continues unchecked, London will soon begin to lose business – not just to cheaper cities in the country, but abroad too, putting the entire UK economy at risk as well.
Something needs to be done
Taking the above into consideration, it’s clear that this hike in house prices will not be a good thing for London’s economy in the long run. With both potential home-owners and business people feeling the effect, it’s clear that something needs to be done, with the huge housing shortage being the best place to start. Only when the demand for housing is eased will property in London cease to be such a sought-after commodity.
Michael Low is the Director of the leading letting and estate agencies in Chelmsford – Balgores Low.
