London Housing Market

Problems in the London Housing Market

  1. First Time Buyers struggling to get on Property Ladder

House prices have been rising faster than incomes, making it more difficult for first time buyers to get on the property ladder. The Halifax estimates that first time buyers in London, need an average deposit of over £41,000. Therefore, to get on the property ladder many first time buyers are having to borrow a deposit from their parents. For those who are unable to do this, it is more difficult to get on the property ladder. In response to th

  1. Supply Growing slower than demand

The number of new houses being built in London is very low, as a % of the total housing stock. (It is less than 0.5%) The main reason is that there is limited land where new houses can be built. Demand however, is growing for various factors, such as net immigration and changing demographic factors:

Why Demand for Housing in London is Increasing

Greater London households and population 1971-2016, thousands

Household Numbers Population
1971 2,705
1981 2,635 6,806
1991 2,841 6,826
2001 3,056 7,188
2016 3,473 7,899
Source: GLA (2003)

  1. Shortage of Housing for Key Public Sector Workers

The rise in house prices to earnings means that many public sector workers like; teachers, nurses, policemen, firemen and low grade civil servants, are struggling to get on the property ladder.

For example, using the average incomes of teachers in Greater London, the ratio of House Prices to Earnings has increased from 4 times income (1995) to 7 times income (2003)

This is having increasingly significant economic implications for the wider London economy. With a shortage of key public sector workers, it could cause under provision of important public sector workers. The NHS, for example, is having to encourage the migration of foreign nurses to fill the many gaps in its London hospitals.

  1. Speculative Buying creating potential for Boom and Bust

The London Housing Market has seen significant rises in House Prices, despite the monetary falls in the early 1990s, it is seen as a good investment. Therefore, it has encouraged speculators from the UK and abroad, to buy housing and land with a view to make capital gains. This has squeezed the housing market by increasing demand. It also makes it more likely that house prices will fall significantly. If house prices do start to slow down or fall, it is possible speculators will sell and cut their loses.

  • Affordability in the rental Sector is still a problem

This has received less media coverage but, for those in the renting sector it is still increasingly expensive to buy.

Average rents in all London Housing market sectors now exceed 25 per cent of the net income of the head of the household

In the early 1990s, an affordable rent was defined by the National Federation of Housing Associations (NFHA) as below 25 per cent of the net income of the head of a household.

Facts about London Housing Market

  • There are over 3 million households in London.
  • The amount of newly built housing in London in any one year represents a tiny proportion of the total stock (less than half a per cent).

London House Prices

  • Average London property price is : £351,028 April 2007
    The most expensive area is Kensington and Chelsea – average house price £918,000
  • The cheapest area in london is Barking and Dagenham average house price £181,802
  • 1990s the market witnessed falling prices with some house owners experiencing negative equity.