There is some news today that London price growth slowed to behind the rest of the country for April. This will doubtless be a temporary blimp and the figures for May, after which the election uncertainties were removed, will see the capital back on surging form again. But spiralling prices are not the only measure of success for a city and there is an argument that even homeowners lose out when prices rocket skywards.
Sound crazy? Well, let’s look at it.
The obvious group of people to suffer is first time buyers. They simply have to grin and bear it or watch as prices continue to rise beyond their reach, resigning themselves to more years living at home with their parents, or renting in the private sector, where rents also keep increasing, sending people further and further into the suburbs or into sharing with extra housemates.
But homeowners lose out too. Most people who sell their home are looking to trade up, and the gap between the property they own and the property they want to buy increases further and further as prices rise and rise.
Let’s say you wanted to move from a £300,000 home to a £500,000 home and, in this strange fantasy world, prices went up 10% overnight. Great news that you’ve got an extra £30,000 equity, but a shame the gap between your current and next property has increased from £200,000 to £220,000, leaving you in need of an extra £20,000. This can easily happen as most people are advised to find a buyer for their current home before offering on their next one. Even if they find a buyer AND another property within just a few weeks, that can see prices rise on the next property and throw out their budget. This can lead to asking their buyer for more money, or dumping them altogether and remarketing at a higher price, at which point the owner of the property up the chain may very well do the same.
To say it is stressful for buyers and sellers is to supremely understate the situation. It sends otherwise quite charming homeowners toward uncharacteristic avarice – coupled with a lovely dose of panic and desperation at losing the house they were told not to look for yet, but have in any event mentally committed to – and leaves buyers feeling they need to commit to pretty much the first property they see, possibly at a higher price than is being asked, and all within about 3 or 4 minutes of seeing it, lest they lose the property they don’t necessarily want anyway to someone else in the queue outside.
Too much of the London property market functions in this way, with the city disappearing out of the reach of the people who make it so interesting. Just because we run a successful and profitable business and operate in the middle to upper end of the market, doesn’t mean we’re not concerned with people who can no longer get even their little toe on the bottom of the ladder. We need them.
Some people call increasing prices progress. We’d associate progress with improvement, and it wholly inaccurate to describe London’s property market as an improving entity for most of the people who live in the city. It really is quite the opposite.
We have no desire to see people lose money on their property, or to invoke some kind of imperialist communism, but we do have a wish that Government would take the lead in creating more affordable property for Londoners, and widening the scope of who is considered an acceptable candidate for those homes. Yes, it’s essential that key workers (nurses, firemen, teachers, etc) are able to live close to where they work, but frankly anyone who is investing their life, time and energy by working in London should be in with a chance of owning their own home.