Signs London’s Housing Market May Be Peaking

Photo by stevekeiretsu from the Londonist Flickr pool

Photo by stevekeiretsu from the Londonist Flickr pool

There are several housing-related stories to bring to your attention today, all of which carry varying degrees of doom. (When do housing stories not carry varying degrees of doom at the moment?)

Jonn Elledge, occasionally of this parish, is over at CityMetric wondering if the London housing market has peaked. While Office of National Statistics numbers for the year to June show an annual rise in house price selling figures of 19.3%, Rightmove has been tracking more recent asking prices and notes a 5.9% drop from July to August. Prices always drop in summer (it’s a quieter time of year) but the average national fall for August over the last decade has been 1.6%; 5.9% is the largest summer drop Rightmove has ever recorded, and it’s the third monthly fall in a row.

Of course, one thing that’s going to prevent the London property market from crashing to the ground like a surprised starling hitting a window, is the lack of supply. We need between 49,000 and 62,000 new homes each year just to keep up with demand, but the London Plan says we probably only have capacity for around 42,000 new homes a year because City Hall’s preference is that we build on brownfield sites — old industrial and office spaces and the like — and that’s annoying the hell out of our neighbouring South East councils. If London doesn’t start building on greenbelt, a town planner writing in the Guardian suggests areas like East Hertfordshire and Chelmsford could have to accommodate up to 11,000 extra new homes just to meet our shortfall as people are forced to move out.

And in ‘there’s always someone worse off than you’ news, it turns out that there are 62 local authorities in England where average affordability is worse than the capital. House prices in London are around ten times average wages (according to the BBC, the average London salary is £39,920; the average house price for 2013 was £424,000). But in places like South Buckinghamshire and the Cotswolds, the affordability ratio of wages to house prices shoots up to 20. Ouch. Though with confirmation of what we always knew — that homes near tube stations are more expensive, carrying a premium of around £42,000 — that ‘affordability’ is relative.

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