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London Property 2020

Where are we now?

Last year’s 15 per cent plunge in square mile business property rental has not discouraged buyers from snapping up the glitziest office blocks. In 2003, £4.56 billion’s worth of commercial property changed hands, half a billion more than 2002. Investors were attracted by property capacity to house big international companies on long-term lease – investment-wise a safe haven.

One result of London’s economic boom has been greater inequalities in income, rising house prices and market rents as well as an increasing shortage of affordable housing. Housing has become a major constraint on the London economy and the ability of businesses and the public services to recruit and retain staff, especially in sectors seen as high priority, such as public health, education, police and transport.

London house price growth will fall to 8% this year according to the Council of Mortgage Lenders. This prediction is supported by Halifax’s forecast and means a steep drop from 15.4% growth last year. Growth figures are expected to drop further next year to 6%.

The growth has particularly affected first-time buyers. In 2002 they accounted for 40% of sales. In 2003, they make up only 26%. It is expected that they will continue to find it difficult to get on the property ladder.

The total requirement for 43,000 homes is more than twice the number of homes currently being built in London. The city needs 28,000 new affordable homes every year.

What are the authorities planning for the future?

The emerging Economic Development Strategy will acknowledge the need for quality affordable homes, including for people on moderate incomes working in essential public services.

Plans are:

• To increase housing capacity to meet London’s housing requirement by capturing 15% of new development for an intermediate housing market targeted at people on moderate incomes. This will make London an inclusive city, whose inhabitants enjoy decent, affordable homes.
• To promote social cohesion through the creation of more inclusive communities in all areas – greater diversity of income groups will be encouraged in areas with high concentrations of affordable housing, through tenure diversification.
• To provide, on redevelopment sites and within regeneration schemes, suitable replacement accommodation on land site wherever possible, otherwise elsewhere in the vicinity of the site.

How are government plans going to affect Euronet members?

• Low commercial rent may attract more businesses to London but lack of housing may discourage workers. Will the proposed strategy address this gap?
• Can the plans to promote social cohesion through the creation of more inclusive communities all over London by encouraging greater diversity of income groups be achieved?
• Will plans to increase affordable housing capacity affect residential property prices?
• How will developers balance profits with plans to capture 15% of new developments in London for the intermediate market? Will this discourage them?

What are your thoughts? Contact us by emailing london2020@euronet-london.com

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