The Times
A renewed spending spree by the international jet set and bonus-rich City workers will boost house prices by another 40 per cent in the next five years, according to a report out today.
The price of an average property in London is expected to reach almost £500,000 by 2012 as the rich spend surplus cash on second homes and investments, pushing owner- occupiers further into the suburbs. This spells disaster for ordinary wage earners who have to step on to the property ladder.
The National Housing Federation report, which was prepared by Oxford Economics, says that a slowdown will soon lift, with the average price of a UK home to reach £302,400, and £478,300 for London. House prices, it says, have risen more than four times faster than incomes since 1997. David Orr, chief executive of the federation, said: “Continuing house price rises and the resulting housing crisis are set to stay with us for a long time.”
The problem will be most acute in London, where the gap between house prices and average earnings is already greatest. The average house price – £338,950, according to Land Registry – is almost 14 times the average salary of £24,445. Mr Orr said: “Fuelled by City hyperactivity and cash-rich foreign investors, swathes of the London housing market are becoming decoupled from the rest of the country.”
About 700,000 people in London are on the waiting list for social housing, 57 per cent more than five years ago. The federation says that the Prime Minister’s recently announced goal of three million new homes by 2020 is not enough. The number of new households formed by then will be 3.9 million.
The influx of foreign residents has put the most pressure on London – a situation that is likely to worsen with the 2012 Olympics. The estate agents Savills estimates that London is home to 16.7 per cent of Europe’s super-rich.
The runaway performance of prime property in central London has masked the slowdown in regional areas, but Oxford Economics predicts that regional price growth will speed up to more than 10 per cent a year by 2010 – several percentage points higher expected in London.
