There’s plenty of opinion, and too few facts, when London’s housing market is discussed. Here, JLL head of residential research Adam Challis helps unravel some of the most frequent assertions:
1) There’s too few homes being built – TRUE
There are around 20,000 homes being built a year, against an established market requirement for around 42,000 a year. Simple economics applies: if there are too few to meet demand, so the price goes up.
2) There are too many foreign buyers – FALSE
London is an international melting pot, and has been for many years. Of the 33 London boroughs, JLL says 25 count than 30% of their residents as having been born outside the UK. In four boroughs, the count is over 50%. So there may be plenty of perceived foreign buyers, but many of them already live in the capital.
3) Foreign buyers are skewing the market – FALSE
Recent reports suggest just 6% of the market is accounted for by foreign buyers. That means UK buyers account for 94% of the action in the market.
4) Foreign buyers are deliberately leaving flats empty – FALSE
A survey of buyers by JLL shows that 85% are planning to rent out their flats; while the rest are either buying for a second home, or buying for children while they study locally. So that’s less than 10% (the second homes) likely to be left empty for a while.
5) Overseas buyers help revitalise the market – TRUE
Foreign buyers are more used to putting down a deposit before construction, which UK owner buyers can rarely do. With development finance from banks hard to come by in recent years, the deposits of foreign buyers have helped jump-start the house builders on several schemes.
6) The housing market helps the economy – TRUE
Housing is reckoned to represent around 3% of GDP, with the industry employing thousands of people. The Berkeley Group reckons each new home helps create 4.5 jobs.
7) Development gives back to communities – TRUE
Councils extract affordable housing contributions, the Community Infrastructure Levy, and Section 106 payments, as a condition of granting planning permission. These payments fund affordable housing construction, community and local authority projects.
Says Challis: “The only long-term solution to London’s housing affordability challenge is to find a closer balance between supply and demand. With population growth of around one million people expected over the next decade, the only solution is to seek strategies that weaken the boom/ bust market cycles that do so much to disadvantage aspirant Londoners.”
“This also means we should look hard to identify genuine solutions to expand supply, wherever they might lie.”