Housing needs: property supporting London
Despite an appearance of globalisation being a relatively recent effect, trading in goods and services has been a major activity for Great Britain for centuries. London initially established its importance as a trading centre benefitting geographically from its site on the river Thames and easy access to the sea with Europe to the east and the Americas to the west. This was later followed by the Industrial age.
The traditional factors of production have subsequently faded, being replaced by high value human capital. The 1980s and 90s featured an economic liberalisation fostered in the capitalist west. Faith in the free market ability to provide its own regulation encouraged the US and UK Reagan/Thatcher governments to deregulate the stock market. New York and London, benefitting from the deregulation of their banking and finance industries, emerged as global leaders in this field.
Accompanying development of London as a financial centre, was a reduction in the number of low to medium cost housing developers operating in the city. A polarisation of wealth developed with highly paid professionals demanding higher cost housing and escalating prices and profits.
Meanwhile, a similar occurrence in New York’s metropolitan area brought prices of property, closer to those of London than other US cities. An international city market was developing – spurred by capital gains inherent in these cities of financial articulation.
London’s strong geographically strategic trading position still attracts workers from its trading partners – bringing new knowledge and skills with consequent advancements in economic progress. Today this remains true. London acts as a magnet attracting an international pool of talent and one ‘which collectively speaks a vast range of languages’. International business does not choose between London and let’s say Manchester – they choose between Central London, downtown Manhattan, or central Munich.
A substantial amount of research has been produced on London as a global city and predictions from the Greater London Authority with predictions of substantial growth in Technology, Media and Telecommunications industries as well as Fin Tech and advanced services provisions. The finance & insurance sector is forecast to grow strongly from 2015 to 2025, increasing output by £11 billion adding 16,600 jobs. Employers are presently reporting problems recruiting and retaining staff due to housing availability and costs. In 2004 the average house cost for a Londoner was 9.5 times average earnings. In 2014 this rose to 16 times average earnings.
At least 42,000 homes a year are required to meet future housing needs. Housing Zones potentially providing land ripe for development have been initially proposed for nine localities with over £310 million of funding already set aside by the GLA. The issue remains as to whether this opportunity will be optimised by the market and whether it can satisfy the housing needs of both employees and employers desperate to attract human capital to London.
Don’t miss Lynne Michael at MIPIM UK on Wednesday 21, October, as she moderates the panel ‘The housing shoratge and rising inequality’.
Lynne Michael is Course Director for Property Management (Building Surveying) at London South Bank & Senior Lecturer in the Built Environment department. Her core competencies include the valuation of commercial, industrial, residential and rural property interests as well as statutory and compulsory purchase valuation procedures. Lynne has an MSc in Real Estate from London South Bank University, Post Graduate Certificate in Commerce from Lincoln University, Bachelor of Business Studies degree from Massey University, Graduate Diploma of Teaching from Wellington College of Education and a Post Graduate Certificate in Higher Education from London South Bank University.
Picture credits: Iakov Kalinin