The ONS reports that average house prices have jumped by £31,000 since last April and £50,000 in the months since the pandemic took hold in March 2020. In percentage terms: 11 per cent in Wales, 16.2 per cent in Scotland and 10.4 per cent in Northern Ireland. An average of 12.4 per cent over the year to April 2022.
London, the ONS does not fail to point out, continues to lag behind with annual growth of only 7.9 per cent. That rate of growth might actually seem pretty significant to many of us, particularly when some light drilling down into the ONS statistics reveals that the median price paid for properties in Sunderland, for example, was £26,000, while in Kensington it was £4,800,000. An increase of 7.9 per cent over a year is not £31,000, it is £380,000 if you own a large family house in Kensington.
Slower growth in London will not provoke a rush to spend £500,000 on a 600sq ft flat, never mind nearly £5,000,000 on a house because nothing in London is £26,000. What it does mean is that rather than looking as though it’s about to fall through the floor, the property market UK-wide continues to be comfortably sustained because there are enough people who want to buy, and have the funds to buy, a house or flat in most parts of the country. Properties being reduced in price are over-priced, not a symptom of a falling market, and London has an over-supply of compromised flats in new developments. Time will tell how those pan out for the developers.
The global elite will always choose to put its money somewhere that is culturally and architecturally world class; where every nationality is comfortably represented; where there is a temperate climate and where the vaultingly ambitious have been heading to mix with their peers for the better part of two millennia. London is virtually a city state that has never failed to look like good value to global money, especially if the pound falls but even in a tiny country its sphere of influence does fade once you are a couple of hours travelling time away. There are plenty of other cities here for the vaultingly ambitious who are not absurdly wealthy and the good thing about exorbitant London pricing is the push to the regions – see price increases above.
Will there be a property collapse? Is Armageddon around the corner? The answer is that there probably won’t and it probably isn’t. People are sensitive about their property and most would cut their spending right back to nothing before they have to sell their house for less than they think it is worth. For those who remember the negative equity years of the 1990s carefully planning not to fall into the same trap again has been one of the keys to sustaining values.
This is all good but the issue of not just generations of young people but people across the generations not being able to buy their own home won’t go away. That’s even though we forget there’s never been a time when everyone could afford to buy a home, far from it in fact. Property is not going fall to a level where it is affordable to people earning £20,000 and the call to relax planning laws just creates panic. The answer is not a crash – the repercussions are too terrifying for us all because property ownership is politically stabilising. Rather, the alternatives must be more appealing. Private Landlords have been essential to providing enough rental homes for people but there is no getting away from the fact that they are too often split between being over emotionally-invested in their properties to not having any interest at all in the people who live in them.
Instead, private investment and private/public partnerships will increasingly be the providers of good quality housing that people can personalise without being removed by a hysterical landlord and which will create a pride in, and love of, a rented home. John Lewis building homes to rent on top of their supermarkets, in store carparks and by distribution centres are the new providers of council housing. Ikea shipping over modular housing have simply re-invented the highly successful post-war pre-fabs. Businesses driven by social purpose have to be the way to go.