http://www.homesandproperty.co.uk/property-news/new-homes/mayor-boris-johnson-backs-new-riverside-schemes-ease-new-homes-shortage?ito=1610&utm_source=eshomesandproperty&utm_medium=email09042014
If I were selfish, I would prefer that the councils never approve high density apartments, so that my properties will go up in Px.
The biggest problems with uk housing are:
1. Economic growth is not well spread out. For the whole of uk, only London and maybe Aberdeen are growing rapidly in GDP. London's population is growing at 100k per year. They need 40k of new homes plus another 20k to make up for previous decades of under building. The uk govt needs to spread the growth around so that not everyone will go to London to get a high paying job.
2. But the councils are too slow and stringent in their approvals. There's an obsession with "keeping with the character", hating high rise towers.... This has to change. London dwellings are already in the pits in west London. For £500k you can only afford a tiny 500 sf apartment masquerading as a two bed apartments. All bedrooms should allow you to walk around a double bed, plus a closet. The kitchen must be big enough to do your daily cooking without knocking over something on the stove. http://matusikmissive.com.au/2014/04/09/6837/
3. Completed new homes are in the region of 25k in 2013. This is still far short of there required 60k. It will take many years of political will to override councils' slowness. The Britons need to get used to living in high density apartments, more compact houses with balconies instead of gardens, just like the Australians do. I suspect by 2018, London will complete close to 40k, still well short of the required 60k for 5 years to make up for previous shortfalls. By 2020, supply demand will be in equilibrium.
4. But London's housing boom will not last forever. Price to income already hit 15x, vs brisbane 6x, melbourne 7x, Sydney 8x, New York 10x, Houston 5x, Los Angeles 6x. But still cheaper than Singapore's 22x, shanghai's 36x, manila 26x. London is already the most expensive and unaffordable city in the Western Hemisphere, beaten only by higher growth Asian cities.
5. Between 2014-2018, London's house price will continue to rise unabated, but at a slower rate of 5-8% pa. Between 2018-2020, it will slow down to 1-3% or even fall slightly due the equilibrium.
6. Rental growth will be slow, at between 1-2% from 2014-16, because help to buy scheme will push many first time home buyers to buy east London like docklands, woolwich, Stratford, and the far flung west like ealing, acton, slough.... But from 2017 onwards, rental growth would revert to 3-5% pa because the help to buy scheme would end and price to income could be over 18x, making it politically unsustainable. The level of home ownership in London will fall further to record lows, pushing most young people to rent.
8. Other investments by the uk govt could alleviate the housing shortage, such as high speed rail from birmingham to London, so that more could commute to work in London.
9. London's rule of law is strong, it will continue to be the top choice for international investors. Asian cities suffer from lack of transparency (except Singapore and hk), reckless approvals with aggressive population forecasts, unsure land title ship .... In Asia,the developers are often the ones who make the most money selling new projects, and they cause the property index to rise. But the secondary market is illiquid and most investors find the difference between new builds and resale as huge as 70%.
Conclusion
The housing situation in London dire. It is already the most expensive place in the Western Hemisphere, due to decades of under supply, stubbornness of the councils to approve infill sites quickly. This must change. Economic growth must be spread more evenly to manchester, Birmingham, Liverpool, Glasgow and Cardiff. A case in point is that birmingham, despite its tag as the second largest city in uk, did not grow in population at all, while London grew at 100k per year.
For this reason, I actually think London's house price growth has legs until at least 2018. It will not be pleasant for those who are looking to climb on board the property ladder. Dwelling sizes will shrink, houses meant for a 3 bedroom single family home will be sliced and diced into 3 tiny squats with 2 tiny bedrooms each. The council should look into this.
West London will grow much faster than the east because there is no supply, whereas the east is inundated with new builds mostly sold to Asian investors. The new builds are of good sizes and actually very well built compared to many of there crumbling homes in the west. But I believe the oversupply will cause east London to underperform for the next 5 years.
The cross rail completion will actually help west London instead of the east, because you can now live in ealing, slough and get to the cbd in 20 mins instead of one hour. But you need to by resale apartments in the west, not new builds.
If I were selfish, I would prefer that the councils never approve high density apartments, so that my properties will go up in Px.
The biggest problems with uk housing are:
1. Economic growth is not well spread out. For the whole of uk, only London and maybe Aberdeen are growing rapidly in GDP. London's population is growing at 100k per year. They need 40k of new homes plus another 20k to make up for previous decades of under building. The uk govt needs to spread the growth around so that not everyone will go to London to get a high paying job.
2. But the councils are too slow and stringent in their approvals. There's an obsession with "keeping with the character", hating high rise towers.... This has to change. London dwellings are already in the pits in west London. For £500k you can only afford a tiny 500 sf apartment masquerading as a two bed apartments. All bedrooms should allow you to walk around a double bed, plus a closet. The kitchen must be big enough to do your daily cooking without knocking over something on the stove. http://matusikmissive.com.au/2014/04/09/6837/
3. Completed new homes are in the region of 25k in 2013. This is still far short of there required 60k. It will take many years of political will to override councils' slowness. The Britons need to get used to living in high density apartments, more compact houses with balconies instead of gardens, just like the Australians do. I suspect by 2018, London will complete close to 40k, still well short of the required 60k for 5 years to make up for previous shortfalls. By 2020, supply demand will be in equilibrium.
4. But London's housing boom will not last forever. Price to income already hit 15x, vs brisbane 6x, melbourne 7x, Sydney 8x, New York 10x, Houston 5x, Los Angeles 6x. But still cheaper than Singapore's 22x, shanghai's 36x, manila 26x. London is already the most expensive and unaffordable city in the Western Hemisphere, beaten only by higher growth Asian cities.
5. Between 2014-2018, London's house price will continue to rise unabated, but at a slower rate of 5-8% pa. Between 2018-2020, it will slow down to 1-3% or even fall slightly due the equilibrium.
6. Rental growth will be slow, at between 1-2% from 2014-16, because help to buy scheme will push many first time home buyers to buy east London like docklands, woolwich, Stratford, and the far flung west like ealing, acton, slough.... But from 2017 onwards, rental growth would revert to 3-5% pa because the help to buy scheme would end and price to income could be over 18x, making it politically unsustainable. The level of home ownership in London will fall further to record lows, pushing most young people to rent.
8. Other investments by the uk govt could alleviate the housing shortage, such as high speed rail from birmingham to London, so that more could commute to work in London.
9. London's rule of law is strong, it will continue to be the top choice for international investors. Asian cities suffer from lack of transparency (except Singapore and hk), reckless approvals with aggressive population forecasts, unsure land title ship .... In Asia,the developers are often the ones who make the most money selling new projects, and they cause the property index to rise. But the secondary market is illiquid and most investors find the difference between new builds and resale as huge as 70%.
Conclusion
The housing situation in London dire. It is already the most expensive place in the Western Hemisphere, due to decades of under supply, stubbornness of the councils to approve infill sites quickly. This must change. Economic growth must be spread more evenly to manchester, Birmingham, Liverpool, Glasgow and Cardiff. A case in point is that birmingham, despite its tag as the second largest city in uk, did not grow in population at all, while London grew at 100k per year.
For this reason, I actually think London's house price growth has legs until at least 2018. It will not be pleasant for those who are looking to climb on board the property ladder. Dwelling sizes will shrink, houses meant for a 3 bedroom single family home will be sliced and diced into 3 tiny squats with 2 tiny bedrooms each. The council should look into this.
West London will grow much faster than the east because there is no supply, whereas the east is inundated with new builds mostly sold to Asian investors. The new builds are of good sizes and actually very well built compared to many of there crumbling homes in the west. But I believe the oversupply will cause east London to underperform for the next 5 years.
The cross rail completion will actually help west London instead of the east, because you can now live in ealing, slough and get to the cbd in 20 mins instead of one hour. But you need to by resale apartments in the west, not new builds.
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| Singaporeans like swimming pools and gyms in the condo facilities. But such facilities in London and New York mean very high service charges or HOA, that higher rents cannot fully offset, resulting in much lower net yields. Labour costs and maintenance is much higher in the west than in Singapore. |
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| London Docklands Limehouse Basin Grand Union Canal 4 four blocks apartment development. High density projects with unlimited supply. |
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| Tree lined houses in west London. Low density projects with very limited supply. |
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