It’s no surprise that house prices in London are on the upswing. Prices have been going up every year since the housing bubble burst in 2008 and overall, in London, prices have almost doubled in the last decade – a trend that isn’t likely to stop anytime soon. A December report by Oxford Economics, on behalf of the National Housing Federation, forecasted that the average cost of a London home will go up by more than 40 per cent in the next six years to almost £650,000, pushing first time buyers and low-income earners out of the market. A shortage of new homes is often quoted as the driving force behind the trend, but it doesn’t help that the residences that are being built are often criticised for not being accessible for people on a limited budget. “What the whole of London desperately needs, and particularly the popular areas, is more supply. When supply can meet demand, this fight for property will disappear and prices will go down,” said Sophie Chick, an analyst at the estate agents Savills. The state of the mortgage market isn’t lending a hand either. Despite interest rates being at their cheapest since 2004 – figures from the Council of Mortgage Lenders show they’re set at 3.06 per cent – mortgage lenders are requiring prospective buyers to hand in a higher advance on their mortgages. The government has announced that next year, for the first time in five years, wages will increase more than inflation, but for the moment this is not the case. Inflation is still hovering around the 1.7% mark, which makes it more difficult for prospective house buyers to save up for a down payment on the mortgage. The rate at which house prices have increased has dwarfed any increase in pay in London. This, coupled with the fact that average pay rises over the last five years have been lower than inflation, means the affordability ratio is only worsening. Help to Buy was presented as a solution to the problem but, apart from fears that the scheme will fuel another housing bubble, it has had a limited impact in EastLondonLines boroughs. Since the start of the scheme, only 42 people used it in Croydon and 28 in Lewisham. In Tower Hamlets and Hackney, two boroughs that are notoriously difficult to rent or buy in, only 14 people have applied for Help to Buy, according to data from the government. Figures from the HMRC suggest that the number of people buying homes is at its highest level since November 2007 and the absolute number of mortgage approvals has gone up 57 per cent in the last year. However, these figures only seem striking compared to the recessionary dip after 2007, but they are nowhere near pre-recession levels. They also don’t take into consideration the demographics of the people actually buying houses, nor the mortgage rejection rate. Many low earning aspiring buyers are still stuck having to rent: yet, this can prove evermore cash stripping, as rent prices have also skyrocketed across the capital. This makes the prospect of saving up to secure a mortgage fade in the distance. Following a London-wide trend, house prices in all EastLondonLines boroughs have significantly increased. Yet, these areas also make for interesting case studies for added causes behind the hike – explaining trends in social and property changes across the city.
Study hand-selected by Noah Winkler, sources: Chiara Rimella and Daniel McCarthy