Rocketing house prices and rents are costing London’s economy over a billion pounds a year and thousands of jobs, according to new research published today. The data also shows the pressure that high housing costs are inflicting on people working not just in low-paid jobs but in many traditionally middle-class occupations.
The price of housing in London – both for those buying and renting – has risen rapidly in recent decades. The capital’s property market even weathered the global financial crisis with a display of great resilience.
After falling in 2008 and 2009, prices in the capital bounced back to their pre-crisis peak in 2010.
Between July 2010 and July 2015, average house prices in London have risen by 45%, with the typical
cost of a home standing at over half a million pounds (£525,000).
The research is being published by a new business-backed campaign called Fifty Thousand Homes to be launched tomorrow (Tuesday) as employers across sectors face increasing competitive and staff retention problems as a result of the capital’s housing crisis.
Key findings of the independent study, conducted by the Centre for Economics and Business Reseach (CEBR) for Fifty Thousand Homes, reveal the impact of high housing costs:
– Businesses face a £5.4bn wage premium in 2015, equivalent to £1,720 per person. This is set to reach £6.1bn by 2020.
– Nearly 11,000 extra jobs could have been created in 2015 (a result of businesses benefiting from greater revenue and therefore being able to generate more jobs).
– Impact on the money in people’s pockets: unnecessarily high housing costs is removing £2.7bn a year in consumer spending or 1.6% of total consumer spending.
– The economic growth (GVA) lost by diverting money away from more productive expenditure will be £14.5bn between 2006 & 2020 – equivalent to £1.04bn a year.
Workers hit hardest
It also paints a bleak picture for many workers in London, who are being priced out of living in the capital
Workers in shops, cafés and restaurants, those cleaning buildings, and those doing office admin would have to pay their entire pre-tax salary to rent an average private home in London.
Social workers, librarians, museum attendants, teachers, postal workers, and gym employees are under extreme financial pressure as a result of rents taking up more than half their salaries.
Only the best paid workers – including company directors and those in financial services earn enough to rent in central London “affordably” (less than a third of their salaries on rent).
Source: UBS
In terms of affordability, London also scores very poorly on the affordability scale with just Shanghai,
Hong Kong and New York lower achieving worse results. Berlin, Geneva and Zurich are the most affordable out of the analysed cities. In the case of Berlin this is due to low housing costs, while in the
case of Geneva and Zurich the figure is low due to high average earnings
Average rents have also risen over the past five years – by 20% according to data from the Office for National Statistics. Median gross employee earnings in London have risen by just 5% over the same time period, meaning that earnings have not even come close to keeping pace with the rising cost of living in the capital. The costs to UK households from the housing crisis are well known – with individuals feeling the squeeze on their finances and not being able to afford to live near to where they work. But there are also huge and substantial costs to businesses, and the sheer scale of London’s housing crisis risks undermining the capital’s position as a global centre of enterprise, talent and success. Attracting and retaining staff becomes harder with high house prices. Top talent is often forced to leave the capital when an individual chooses to start a family (and is unable to afford a suitably sized home in London). Businesses in retail and other consumer-facing sectors feel the pinch – as housing eats up the spending power of the capital’s inhabitants, leaving less left to purchase discretionary items. London’s position as a global centre of commerce could also be undermined if the cost of living in the capital continues to soar. London ranks among the most expensive places to live in the world. In dollar terms, the normal local rent in London is over three times that of Berlin and close to double that of Dubai, according to data produced by UBS.
Baroness Jo Valentine, Chief Executive of London First, one of the business organisations that helped launch the campaign, said:
“This needless housing shortage needs urgent action. If we carry on as things stand, in 10 years’ time London will be a no-go zone for employees across sectors and at almost all levels.
“I want the next Mayor of London to wake up each morning thinking about how to increase housebuilding – because only doubling our current levels of housebuilding to 50,000 a year will we solve this crisis.”
Scott Corfe of CEBR, which conducted the research for Fifty Thousand Homes,
“Our research shows that the housing crisis is resulting in substantial costs to businesses and risks undermining the capital’s position as a global centre of enterprise, talent and success.”
full report can be downloaded >http://www.cebr.com/reports/housing-crisis-the-economic-impact-revealed/
Further Reading
Draw up plans to build more homes in two years... or we'll do it for you: PM's threat to reluctant town halls
Taylor Wimpey CEO Peter Redfern will lead Labour Housing Redfern Review
TfL could help fix London’s housing Crisis as well as our trains
Zac Goldsmith: housing crisis number one priority in London – videos
why Uber is good for london
10 winning ideas announced by NLA ! for Housing to help solve the London housing shortage.
Labour conference: Sadiq Khan >"I'm going to make the election a referendum on London's housing crisis"
Government ministers and housing association leaders have negotiated a deal to extend the right-to-buy policy
What Jeremy Corbyn's leadership victory may mean for housing policy in the UK
Marie's Question >Jeremy Corbyn The New Labour Leader takes his seat in the Houses of Parliament
Newly Elected Labour Candidate, for Mayor of London, Sadiq Khan, outlines his Housing Policies
property eCommerce is booming !
Building Markets for the Good of People > BoE Open Forum
Bank of England concerns over Property buy-to-let boom
Government ministers and housing association leaders have negotiated a deal to extend the right-to-buy policy
How low can you go ? speech by Andy Haldane BoE Chief Economist
Three Truths about Finance - Governor of BoE - Mark Carney
Mortgage Lenders and Administrators statistics Bank of England Sept 2015
Government ministers and housing association leaders have negotiated a deal to extend the right-to-buy policy
How Nest is revolutionising smart homes with Nest Weave & Creating Most Comprehensive Developer Platform for the Home
How LG Smart Homes and nest.com are making the best use of IoT
ABB unveils intelligent voice-activated smart home system
Comments
Post a Comment