I’m often struck by the adaptability of Londoners. This trait is generally highlighted in times of strife; IRA bombings or 7/7, the riots of summer 2011 or yet another Tube strike.
Londoners; A Hardy Lot
For me, it is the ability to shoulder the little things; endless queues – everywhere, the daily grind of commuting, the occasional dysfunction of aging infrastructure. These are things we take for granted – accept as part and parcel of being in the world’s de-facto capital city; part of the price for being close to the economic and cultural centres of the globe. Indeed this luxury does and should come at a cost and high house prices are just the start. West End and City office space regularly ranks at or near the top of the global list of expensive places to do business. Retail space on Bond Street competes and beats the likes of Rodeo Drive, the Champs Elysees and Singapore’s Orchard Road on the same terms.
So maybe we don’t have much to complain about when it comes to high house prices. There is no question that Londoners largely accept their lot and indeed many have made material gains in wealth off the back of the high price growth rates. The problem of course is not the fortunate existing owners of London property, but the many that are priced out of home ownership in the Capital. Lost opportunities for wealth formation are important, but are actually just the start of the concessions that come with inadequate housing choices.
When individuals are unable to address their basic housing requirements, they are forced to compromise on many other areas of life; family formation rates are delayed in London, discretionary spending is increasingly diverted away from ‘wants’ in order to deal with ‘needs’. In housing terms, twenty-somethings live much longer in rented accommodation, often in shared arrangements that are more akin to student digs than folk who are – as Government likes to put it – ‘getting on in life’.
There is also a direct cost to London’s economy. Increasingly we are seeing businesses assess whether they can attract talent at the right price in the Capital. London is in voracious global competition for talent and if this balance tips too far in the wrong direction, job prospects for all Londoners will be impacted as businesses locate elsewhere. With some businesses already providing mortgage support programmes to retain talent, we are dangerously near this tipping point.
It’s About Housing, Stupid
None of this is lost on City Hall – Mayor Boris Johnson has just published a blueprint for the creation of up to 26,500 new homes in the London Riverside Opportunity Area. The GLA have made housing supply a top priority and with a strong market supporting, we are heading in the right direction to get closer to meeting need. However, there is recognition that the ‘squeezed middle’ is caught between a lack of deposit for full market ownership, but earning too much to qualify for affordable housing. Aspirant first-time buyers are stuck in a cycle of high rents that syphon off savings and prices that are growing at a faster rate than income.
Recent JLL research shows that amongst this group, 56% expect to be able to save for a deposit within six years. However, 34% expected that it will be more than 10 years before they can afford to buy, effectively resigning themselves to long-term rental housing. Now clearly there is nothing wrong with renting per se, but a loss of self-determination and choice is severely damaging to aspiration.
Solving the Housing Crisis is About Choice
The same JLL research also surveyed hopeful first-time buyers to understand what their housing wants might be. Top of the list was location, followed by proximity to public transport. Size of property came out third. These results for me are critical, because they say that well-located homes matter more to this group than the physical space they require.
These results also provided insights into the solutions that are so vital. For example, it considers the Pocket development model – providing well-located, well-designed homes – that is actually giving aspiring first-time buyers the properties they want. And by innovating with more efficient property layouts to remove any wasted space, a Pocket property ‘prices-in’ around 150,000 more first-time buyers than is possible under standard regulation. This amounts to a doubling of the number who can afford to buy a home amongst London’s 22-39 year-old workforce.
So – 150,000 more people with the opportunity to become home-owners; to ‘get on’ in life and to have the home they want. If this is doing its part to solve London’s huge housing challenges along the way, it is hard not to see the vast potential that innovators like Pocket can offer for all Londoners.
More from JLL Residential Research here.