London First and CEBR have released a report, which claims that the huge increase of London house prices is costing the British economy over one billion pounds every year. They claim that this is because investors are pumping money into purchasing and letting properties instead of spending money on other things.
The housing market in London was very quick to recover from the economic crisis of 2008-9 and has seen the prices of rent and houses rocket in the last few years. The Office of National Statistics states that the average London house price is now £525,000- this is 46% higher than their peak before the crisis. Rents have seen similar movement and have now risen by 33% over the last ten years.
CEBR and London First carried out the report and discovered that people in many industries can now no longer afford to be in capital. As a result of this, many companies now need to pay more money to hire staff and compensate them for their day to day living costs. It is believed that this then has an impact on consumer spending because of the amount that people have to put aside for their mortgages or rent. The report estimated that around £2.7bn could have been pumped into the economy if it wasn’t for the fact that housing costs have outpaced inflation by such a huge margin. They estimate that this money would have translated into around 11,000 jobs.
The report stated that:
“The housing crisis is making it difficult to attract and retain staff in retail, care and sales occupations,”
“Even if they spend a limited amount on other goods and services, they are effectivelypriced out of living independentlyin the capital. They need to co-habit with partners, friends or family, or be eligible for social housing in the capital.”
The chief executive of London First, Baroness Jo Valentine, said:
“This needless housing shortage needs urgent action. If we carry on as things stand, in 10 years ‘ time London will be a no-go zone for employees across sectors and at almost all levels.”
“I want the next mayor of London to wake up each morning thinking about how to increase house building ñ because only doubling our current levels of house building to 50,000 a year will we solve this crisis.”
Scott Corfe of CEBR stated:
“Risks undermining the capital ‘s position as a global centre of enterprise, talent and success.”