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London needs micro-homes to solve the housing crisis

Everyday, thousands of city workers are forced into excruciatingly long commutes from the outskirts of London, because living in the city centre – and, frankly, most of the capital – is simply unaffordable.

Micro-housing would allow Londoners to commute less and live more. Never mind if that’s more time to join a gym class, meet friends at restaurants, catch a show or a Spanish class. What matters is that it’s more time for you, and less time stuck on the train or in a car.

Housing is the most crucial problem facing London.

In the past 20 years, London’s population has grown by 25 per cent, but the number of homes has only grown by 15 per cent. More people and not enough housing has pushed up prices, creating an affordability and ownership crisis.

The proportion of income spent on housing has grown from one fifth of incomes 15 years ago to one third of incomes today. If you’re among the city’s lower earners, it’s highly likely to be taking even more of your pay packet.

Because of high housing costs, many are forced to endure insufferably long commutes, live in overcrowded share flats or, most worryingly for the economy, leave the city altogether.

The loss of capable people has serious ramifications for Britain’s economic productivity. All too often people end up taking lower paid jobs elsewhere, which hold them back and mean that they are less productive.

Chang-Tai Hsieh and Enrico Moretti from the University of Chicago estimated that US GDP is 13 per cent lower than it otherwise would be because people are not able to live where they would be most productive.

The damage to the UK’s GDP from people living where they are not the most productive is likely to be even higher.

The housing crisis is not just an economic policy problem – it also has serious political ramifications.

Housing affordability issues, particularly among young people, are damaging trust in the entire free market system. This is driving young people into the hands of extremists like opposition leader

Jeremy Corbyn, whose interventionist policies would only make things worse.

Which is where micro-houses come in. Currently blocked by housing guidelines and local authorities in the UK, this creative solution could help ease some of pressure on the market.

As urban policy researcher Vera Kichanova makes clear in a new paper for the Adam Smith Institute, when it comes to housing, small is in fact beautiful.

Micro-homes are nothing like what you are imagining. They are not cramped sub-divisions of existing units. Rather, micro-houses are stylish, modern homes that use space intelligently. They win prestigious architectural awards. They often include shared game rooms, gardens, co-working spaces, living areas, and additional services. They help combat loneliness with group activities and communal spaces.

In short, they are perfectly suited to the fast-paced inner-city lifestyle craved by many millennials.

There is no standard definition of micro-homes, but they can perhaps be best understood as purpose-built homes that are below the existing 37 square metre space standards for an apartment.

Micro-housing projects have been a huge success in New York City, Hong Kong, Tokyo, and, in the few cases they have been allowed because of legal grey areas, London.

Carmel Place in New York City, which was completed in 2016, contains apartments that are just 24 to 33 square meters. The project won an award from the American Institute of Architects.

London is home to The Collective Old Oak, the world’s largest micro-apartment building, which offers 546 private units and a wide array of communal spaces.

Micro-housing is not a substitute for more fundamental planning reform, such as ending the prohibition on building out or adding extra storeys on famously short London buildings. And it goes without saying that nobody should ever be forced to live in a micro-property.

However, the choice should be available for those who prioritise living closer to work and entertainment over a large house in the suburbs.

These smaller properties would ensure that the land in the city centre is used more efficiently, providing an important piece of the puzzle to address London’s housing crisis.

It is the responsibility of local authorities, particularly in central London, to think more creatively about how to deliver more housing. They can start by abolishing arbitrary restrictions on room sizes, and declaring themselves open to micro-housing.

This would encourage architects and builders to propose such projects across the city.

In designing housing guidelines, local authorities should remember: it’s not the size of your home that matters, it’s how you use it.

Source: City AM

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This chart shows how badly house prices are faring in central London boroughs

Key measures of the health of central London’s housing market are trending downwards, according to a new graphic produced by UBS.

The Swiss investment bank sent its third ‘London residential monitor’ note to clients on Wednesday, which is based on analysis of over 100,000 listings on online property portals. UBS’ analysis found that:

  • More and more property listings in London are cutting their asking prices
  • Asking prices are being reduced on average by 2.6% versus historic prices
  • Most houses remain on the market for 128 days, a high since UBS has been measuring
  • Expensive houses in boroughs like Kensington & Chelsea are taking longer to sell

“The London housing market remains weak,” UBS analyst Osmaan Malik and his team wrote. “Stretched affordability, high levels of supply at prime price points, and numerous changes to stamp duty have all taken their toll, at a time where Brexit uncertainties linger.

“In past cycles, a London downturn has pre-empted a wider loss of momentum and decline in consumer confidence. The Bank of England appears to think this time may be different, as the capital is more exposed than the national market to stamp duty changes and is more likely to be impacted by the departure of European Union nationals.”

UBS’ data shows that the steepest house price discounts are in Kensington and Chelsea, where average listing prices are over 4% lower than historic averages. The borough also had the highest average asking price and listings in the area spend the longest time on the market.

Land values in prime central London declined by 2.8% in the fourth quarter of 2018, according to recent Knight Frank data, taking the annual decline to 5.6%.

Economists believe house price growth across the UK could be sluggish this year. Britain’s official exit from the EU in March is seen as the most important influencing factor on house prices across the country in 2019.

Source: Yahoo Finance UK

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Londoners are now snapping up property outside the capital

Londoners have bought £30bn of property in other parts of the UK over the past year as record numbers of locals leave the capital, new figures show.

The amount spent on new homes elsewhere by the capital’s residents reached a 10-year high in 2018, according to estate agents Hamptons International.

The figures suggest Londoners may be seeking better value for money or quality of life in other parts of the UK, swapping the capital’s overheated property market for cheaper areas.

London residents do not appear keen to stray too far, with the data suggesting 7 in 10 bought their next properties in the south-east and east of England.

But the number of Londoners heading to the Midlands or northern England has also gradually increased, from just one in 14 who left the capital in 2008 to one in five today.

Yahoo Finance UK previously reported how the north-west had the highest rise in property prices last year at 4.9%, followed by Yorkshire and the Humber at 4.4%.

The British cities with the fastest-growing markets in 2018 were Newport, Glasgow, Edinburgh and Manchester.

Official figures released earlier this year showed record numbers of Londoners were deserting the capital, with the exodus most pronounced among people in their 30s and 40s with children.

More than 330,000 London left the city in the year up to June 2017, with Newham in east London recording the greatest outflows of any London borough.

So many Londoners have moved to or bought second homes in regions like Cornwall and several towns on the southern coast that they are known as Down from Londoners or DFLs, with some locals resenting the impact on property prices.

The latest Hamptons International report shows the amount spent by the average London buyer outside the capital rose in 2018 to just under £399,000.

Aneisha Beveridge, head of research at Hamptons International, said: “Historically most people moving out of London have done so because of changing priorities, such as starting a family or generally wanting a slower pace of life.

“But increasingly as affordability in the capital is stretched, more households are looking beyond the confines of London to buy their first home.”

But she said the 2018 figures were probably a peak, with a slower housing market expected to push down purchases in the year ahead.

The property market has already begun to cool in London, with the latest official statistics showing prices were down 1.7% in October on a year earlier.

Homes are now cheaper in the capital than they were two years ago, with an average purchase price of £473,600.

But the city’s average prices remain incredibly high, with the average London home still costing £206,000 more than a decade ago – a steep rise of 77%.

Source: Yahoo Finance UK

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London ends the year with negative growth for the second time in 23 years

House prices in the capital have fallen by 0.1% over the past 12 months, making it only the second time in 23 years that London has ended the year in negative growth, The Hometrack UK Cities House Price Index has found.

Recent house price falls are doing little to materially change the affordability picture in London. The house price to earnings ratio peaked at 14x in 2016 and has started to fall but remains stretched at 13.3x.

Richard Donnell, insight director, Hometrack said: “The diversity of London’s housing markets is shown by the clear divide between low house price growth in outer London and commuter areas and nominal price falls concentrated in high value, inner areas of the capital. In 2019, house prices we expect prices to continue to fall most in central areas of London.

“Our projection for a 2% fall in overall London prices will reduce the price to earnings ratio to 12.8x, in line with levels last recorded in mid-2015.”

Prices are falling across two thirds of local authority areas across London City by up to -3.5% in Camden, while average values are rising in a third of markets by up to 2% in Barking and Dagenham.

House price inflation has slowed to 2.6%, the slowest rate of annual growth since 2012, due to ongoing price falls in London and a sustained slowdown across cities in Southern England.

Edinburgh is currently the fastest growing city (6.6%) with price rises in Manchester and Birmingham also running at above 6%. However, only four cities are registering higher levels of house price growth than this time a year ago – Manchester, Liverpool, Cardiff and Newcastle.

The cities that have the seen the greatest slowdown are all located in the South of England; Bournemouth, Portsmouth and Bristol.

Affordability pressures have increased in these cities over the past year and they now record the highest house price to earnings ratios outside of London, Oxford and Cambridge.

Over the course of 2019 Hometrack expects UK city house prices to rise by 2%, as above average growth in large regional cities offsets price falls in London.

Prices in London are forecast to register house price falls of up to 2%, while in more affordable cities such as Liverpool and Glasgow price could rise by another 5% next year.

Donnell added: “Outside of London and the South affordability levels in regional cities remain attractive but this is changing.

“House price growth has run well ahead of earnings growth for the last five years and together with small increases in mortgage rates, as well as growing economic uncertainty, the speed at which households bid up the cost of housing is reducing.

“The fundamentals of housing affordability will shape the prospects for city house prices in 2019. This is already the case with flat to falling prices in the most unaffordable cities and above average growth in the more affordable areas.

“Ultimately, the speed at which affordability translates into price changes depends on economic factors, changes to mortgage rates and household sentiment. Brexit is the greatest driver of uncertainty in the near term and the prospects are for a slow start for the housing market in 2019.”

Source: Mortgage Introducer

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How Has Brexit Uncertainty Affected The London Property Market?

The effect of Brexit on the UK property market is not a straightforward topic and there are many factors to consider. However, when it comes to London property in relation to Brexit, optimism is in short supply. Falling house prices, the weakening of the pound and a drop in property transactions seem to have affected the capital far more than other areas of the UK. Uncertainty around the London property market was brewing even before the Brexit vote. London property prices had been the highest in the country for several years, with record rents and a great number of properties selling for well over the million-pound mark. However, the market had been slowing down as the referendum got closer, with many properties selling for less than their asking price and fewer properties being put on the market.

The possibility of a no-deal Brexit has had a further negative affect on the London property market. Across London and the South East, property experts like surveyors, investors and estate agents have all witnessed a depression in the sales market. There has also been a dramatic decline in the number of properties put on the market, with many homeowners deciding to hold onto their property rather than selling in such an uncertain market. The London market sees a far higher number of overseas buyers than the rest of the UK, which mean that bad news about Brexit has taken an effect. Huge asking prices mean large investments and for risk-averse investors, it isn’t worth investing in London at this time. Transaction levels are down across London, with high-end luxury properties also experiencing a notable downturn.

UK property has long been regarded as one of the most stable asset classes in the world and the British property market has weathered bigger storms than Brexit. Though it took time, it definitely recovered from the global recession of 2008, before pulling through the housing market slumps experienced during 2009 and 2010. Many cities in the North of the UK have remained resilient despite the Brexit vote. On the whole, UK house prices are rising by around 3%, and in certain cities this growth is even higher, like Liverpool where house prices grew by 6.9% in 12 months. Property investment firms like RW Invest have noticed a real change in demand, with investors turning away from London and choosing to invest in property in the North of the UK.

Research conducted in 2018 found that 77% of UK-based property investors believed that Brexit will not affect their long-term investment strategy. It was also found that 53% of those surveyed would still rather invest in a traditional asset class like property instead of a newer, potentially less stable asset class like cryptocurrencies. The study also revealed that 18% of investors, which works out at 1.23 million people in the UK, will consider investing in the next 12 months in a property. As well as this, over three-fifths of property investors regard UK property as a safe and secure asset class in the current market. This report on investors and their views about the property market is relatively positive, showing that buy-to-let investment is still a viable alternative. For many buy-to-let investors, Brexit uncertainty has shifted their focus from the instability in London to the more lucrative North which continues to be less affected.

Source: Shout Out UK

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London house price boom to end as buyer’s market returns

The London property market is slowly returning into the hands of buyers, as the days of house price growth outpacing the rise of inflation look set to come to an end.

Industry analysts and economists polled by Reuters over the last week have predicted house prices in the capital will fall 1.7 per cent this year and a further 0.3 per cent in 2019, even if the UK does not secure a Brexit deal.

Property values in London have more than tripled in the last two decades, boosted by foreign investors.

Asking prices in London fell 1.7 per cent this month from the same period in October, according to data from Rightmove.

Brexit uncertainty is not the only thing holding back prices, as sharp increases in stamp duty and land tax stifle transaction volumes.

Experts have predicted London prices to rise by 1.5 per cent in 2020 after the upcoming dip, while economists have said inflation will rise two per cent.

However online estate agent Emoov’s chief executive Russell Quirk had a message of positivity for Londoners looking to sell in the next few years.

“London demand is starting to poke its head above the stamp duty-laden parapet again,” he told Reuters.

“History tells us that you can’t subdue London long term and therefore it’s clear that the current downturn in the capital’s volumes and values is temporary.”

Nationally, house prices are forecast to rise two percent this year, 1.8 percent next year and two percent again in 2020. Though moderate, those gains are below expectations for wage increases and will likely appease first-time buyers who are struggling to get on the property ladder.

Source: City A.M.

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London house prices: Homes in the capital lose value despite the UK’s resilient property market

London house prices fell 0.3 per cent in the year to September, according to Office for National Statistics (ONS) data released today.

Growth in the capital lagged far behind the UK-wide average, which was 3.5 per cent, a small increase from 3.1 per cent last month. The growth puts the average house price across the country at £232,554.

But homes in the capital did not decline as badly as they did in August, when prices fell by 0.6 per cent.

The figures from the ONS and Land Registry show the disparity between the London property market, which has been in decline since March, and other parts of the UK. Growth was fastest in the West Midlands, where house prices increased 6.1 per cent.

The decline in growth reflects uncertainty around Brexit, with London taking the brunt of lower buyer confidence, according to property experts.

Richard Snook, senior economist at PwC, said: “London remains the biggest regional story as the price decline continues, albeit at a modest rate.

“London is one of the most internationally dependent parts of the UK, due to economic integration with Europe and the high share of foreign citizens in the labour market.”

“Therefore, the greatest impact of Brexit-related uncertainty was always going to be felt in the capital,” he added.

In its November inflation report the Bank of England suggested the London market has been disproportionately affected by regulatory and tax changes and lower net migration from the EU.

But the London market has also been impacted by rapidly rising house prices in the capital, which have left many potential buyers unable to afford a home.

At £482,000, the average house price in London is more than double the average of the rest of the country. The most expensive area is Kensington and Chelsea, where the average house costs just under £1.5m.

Head of residential property at Sotheby’s International Realty, Guy Bradshaw, blamed “punitive” stamp duty costs.

“When will the government start listening to the industry and stop ignoring these figures? London estate agents have been banging the drum for a stamp duty reform for years and today’s figures clearly show a suffering market,” he said.

A breakdown of growth by borough shows the fall mainly impacts central London properties, with outer London boroughs such as Brent and Redbridge seeing a rise in house prices.

North London estate agent Jeremy Leaf said: “Once again we are seeing prices softening but no dramatic change, underpinned by low mortgage rates and supply.

“The price falls in London are masking a more resilient picture elsewhere in the country, underlining how misleading it can be to judge the market as a whole by what is happening in one region.”

Source: City A.M.

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Lack of supply pushes rents outside of London to £800 per month

Typical asking rents outside London have hit £800 per month for the first time.

There was a quarterly rent rise of 0.8%, the biggest jump recorded in this time of year since 2015.

Notably there are 8.7% fewer rental properties available compared to this time last year and 19.4% fewer in London.

The slowdown in the buy-to-let market has contributed to this lack of choice, as there was a 14% drop in mortgage approvals compared to the same period last year and a 53% fall from three years ago.

Miles Shipside, Rightmove’s commercial director and housing market analyst, said: “Rental demand is currently outstripping supply in many locations, especially in the capital.

“The exit of more landlords from the buy-to-let market in recent years has been due to a raft of different factors, from the more onerous tax regime and more stringent borrowing criteria, to the higher stamp duty on second home purchases and extra legal obligations.

“What we’re left with is a lack of available homes for tenants looking to find their next place to rent, meaning that when the right kind of property does come along it isn’t sticking around for very long before it’s snapped up.”

Shipside added: “Although some of the shortfall in supply will be met by quality housing provided by Build to Rent schemes in the coming years, it’s likely stock shortages will remain in areas with a high concentration of renters.

“Given this backdrop and rents likely to rise, private landlords should try and look beyond the current challenges if they can and stay in the sector.

“If they concentrate on improving the spec of their existing properties and buy better quality accommodation to add to their portfolios, tenant demand should steadily improve rental yields.”

Source: Mortgage Introducer

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UK house prices: Growth slows again, falling to a six-year low in September as London sees prices plummet

UK house price growth slowed again in September, down to its lowest annual rate in six and a half years at 0.9 per cent.

The south east became the first region to report negative annual growth, with house prices dropping a modest 0.1 per cent year on year, according to Your Move’s House Price Index.

Almost every region saw a significant slowdown in the rate of annual growth, while transactions fell 16 per cent from August, with around 72,500 sales completing last month.

While most regions saw annual price rises, month-on-month growth continued to slow across the UK, falling by 0.1 per cent in September from August.

That left the average house price in England and Wales at £302,626.

In London, Westminster saw prices plunge 9.4 per cent in the last year despite growing 4.9 per cent month to month from August.

Tower Hamlets, whose market Your Move said is comprised predominantly of flats sold to staff working near Canary Wharf, saw September prices plummet by 9.7 per cent year on year.

However, cheaper boroughs sustained the capital’s market, while in greater London prices rose 3.9 per cent year-on-year, and grew 0.4 per cent from August to September.

Oliver Blake, managing director of Your Move and Reeds Rains estate agents, said: “The chancellor will face a difficult balancing act for housing when he comes to do his Budget at the end of this month.

“He’ll probably be keen to tackle the continuing problems with affordability whilst addressing ways to stimulate the market.”

Source: City A.M.

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London house prices: landlord exodus opens path for first-time buyers

An exodus of buy-to-let landlords in London is opening up a unique opportunity for first-time buyers, property website Rightmove has suggested.

House price movements in the capital are at their most subdued in eight years, with prices for one and two bedroom properties falling marginally over the past year.

This is the point where aspiring first-time buyers typically have competed with investors, but a 3% rise in stamp duty for buy-to-let and second home properties has put off many would-be landlords, clearing the way for new buyers, The Times reports.

Miles Shipside, a Rightmove housing market analyst, said: “Government policy has sought to reduce [buy-to-let investor] activity and so tilt the balance back towards first-time buyers.”

He added that “landlords are clearly buying far fewer properties and that leaves a gap in the market for first-time buyers”.

While landlords were hit with the 3% stamp duty surcharge from April 2016, first-time buyers were “effectively awarded stamp-duty-free status in November 2017”, said Shipside.

The fall in prices at the bottom of the market over the same period provides an opportunity for aspiring homeowners to “negotiate harder”, says Shipside.

The muted buy-to-let sector “is also dampening demand and stifling the usual autumnal hike in asking prices”, says Homes and Property.

The Rightmove Index has found the autumn selling season, which sees vendors launch properties that have been held back over the summer, has started with a whimper as asking prices in central London fell 1.1% to £625,000 this October compared to the same month last year.

Property analysts believe this slowdown is due to deepening political uncertainty in the build-up to the UK leaving the European Union next March and the gap between house prices and household incomes in the capital, with first-time buyers still struggling to save for a deposit.

North London estate agent and former Rics residential chairman Jeremy Leaf told Mortgage Strategy: “Buyers and sellers seem worried about the two ‘B’s – not only about the impact of a good, bad or indifferent Brexit deal but also the looming Budget at the end of the month.”

All eyes now turn to Philip Hammond, with the chancellor rumoured to be looking to encourage more landlords to sell to long-term tenants for a capital gains tax relief.

This could provide a win-win situation for both investors and first-time buyers, and further boost the number of one and two bedroom properties on the market.

Source: The Week