Saturday 19 December 2015

Why Is It So Expensive To Live In London?

London. Capital City of England, home to the Queen, and one of the most popular cities on earth. Attracting over 16 million tourists in 2013, its charm is undeniable to those who come to visit.

See our YouTube video HERE.

But for those living in London, the story is quite different after the initial 'honeymoon period' of living in the world's greatest city passes. London is known not just for its exemplary Britishness and history but equally the dreadful cost of living suffered by its inhabitants, as sky high as the towers of Canary Wharf.

Just a few months ago, London overtook Hong Kong as the most expensive city in the world to live in- a surprising statistic when you consider that just seven years ago, London was ranked fifth. Since then (in dollar terms) the cost of working and living in the capital has risen by almost 40%, the third highest growth behind Rio De Janeiro and Sydney respectively. Consequently, we've been seeing some crazy stories, like about how this student finds it cheaper to commute from Poland weekly than live in London accommodation, and how renting an average place in Camden Town costs more than commuting from Madrid everyday. Even in Britain, London's housing is ludicrously expensive- while the nation's average house costs £299,000, according to the Greater London Authority, London's average price is currently over £530,000.

So what is the reason behind London's new status as the most costly city in the world to live in? Well, at the core of this complex issue is supply and demand. Simply put, prices are so high because demand is constantly increasing, as supply is decreasing.

It's not too difficult to see why demand for housing in London is so high- one of the most vibrant, iconic cities in the world, the capital of England is a very appealing place to live. Though it has been having its troubles, transport in London is unparalleled in the rest of Britain. There are all the shops, leisure centres, cinemas, theatres, restaurants, that an individual could desire.

But increasing numbers of people are unable to select which city they live in, solely based on these luxuries. For many people, employment is what matters, and the factor that is driving many people to London. While much of the British economy has been slowly recovering since 2008, London's economy has accelerated the fastest- meaning massive numbers of jobs have been created in the capital, such that in early 2014, London had 10 times more job vacancies than other British cities, such as Birmingham and Edinburgh. Jobs have played a significant role in peoples' decisions to move to London, driving up demand for housing.

Despite the 2008 crisis, the City of London has thrived, creating many
high paid jobs.
However, the recent jobs boom in London has caused prices to rise in more ways than just this. It's important to look not just at how many jobs are available, but what types of jobs these are- and it is particularly noticeable that higher paid jobs make up a larger proportion of jobs in London than in most UK cities. The finance industry has particularly grown in stature in the past 30 years or so in London, despite shocks such as the recent 2008 crisis; data compiled by Z/Yen Group analysts concluded that London was the most competitive financial centre in the world, coming first above cities like New York and Singapore in every category tested.

Such an increase in high paid workers coming into London has meant that there has been a housing development boom, largely in luxury properties regular Londoners couldn't afford- pushing up the market prices, by as much as 7% in the last year.

Globalisation has further compounded this issue, allowing foreign wealthy individuals (the likes of Roman Abramovich and Lakshmi Mittal) to relocate to the capital, purchasing or building massively expensive properties at the same time. While foreign investment in the capital does indeed have its benefits, this aspect means that housing prices rise massively. Currently, almost 10% of the world's billionaires live in London (the highest proportion in the world), and the number of millionaires is also rising.

Both London's mayor and the government
have sought to take on London's housing crisis-
but their efforts have been relatively futile.  
Supply of affordable properties in London has not been keeping up with this rocketing demand. Despite George Osborne's efforts to stimulate home buying through schemes such as Help to Buy, which have made it easier for first time house buyers, not enough houses are being built. Mayor Boris Johnson's target is 42,000 homes built per year- but House of Commons research has suggested that over 80,000 would be required to meet demand.

With their financial power, wealthy individuals are able to purchase property in prime areas in central London- causing the average house prices of these areas to increase. Consequently, with a lack of new affordable housing developments in the centre, poorer people are being 'priced out'- forced to move to cheaper areas on the outskirts of the city. 
Lone Editor


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