The price of land and housing has caught the public’s attention – ranking top of the issues which Londoners cared about going into the election. CISI student members recently received a unique insight into the debate from Alex Hilton, Director, Generation Rent
“Buy land. They’re not making it anymore”
Erudite as ever, Mark Twain was surprisingly prescient in his quip. In recent decades, land value in metropolitan hubs has sky rocketed. A recent Economist article listed the stark facts. In the past 10 years, real prices in Hong Kong have risen by 150%, whilst a square mile of Manhattan residential property now costs $16.5 billion.
In London, this inflation is equally apparent, and whilst the Economist also highlighted that “residential property in Mayfair can go for as much as £55,000 per square metre”, these rises are not confined to leafy residences.
At the most recent CISI student member event, attendees heard from the excellent Alex Hilton, Director of Generation Rent. He explained his organisation’s perspective on the growth of house prices across all areas of London. Highlighting a trifecta of changes in housing demand, lack of supply and supplier control of the market, Hilton described a unique situation for house prices, and argued that serious reforms are needed to ensure major damage is not done to the London economy.
Indeed, his argument for lack of supply is supported by the figures. In an article for City AM, Jonathan Manns provided some numbers. “Recent ‘Further Alterations To The London Plan’ set housing targets for London’s boroughs to permit 42,000 new homes per year” he explained, whilst meeting the current need and the historic backlog would “require a build rate of some 62,000 homes per year” – a dangerous disparity. The International Monetary Fund (IMF) agrees, highlighting the housing supply crisis as one of the biggest threats to the UK economy in 2015.
Hilton emphasised the effect on businesses of the threat of a brain drain, as individuals vacate business hubs and economically beneficial industries for less well paid roles in areas where the cost of housing, and living, are more feasible. Equally he highlighted the position of industry, where a Confederation of British Industry (CBI) survey of April 2014 showed that 48% of London businesses believed the lack of affordable housing increased their costs.
This impact is serious, and although there are various political and economic perspectives on the best solution – one of which was seen in the Conservative’s recent announcement of the renewal of “Right to Buy” – it is one which has not yet seen a definite conclusion. Alex Hilton’s presentation provided fuel for an excellent discussion, and the event’s attendees put forward some challenging questions. Without doubt an important issue, and valuable to have an expert speaker offer their insights.
Alex Hilton was speaking at a special CISI event for student members. The next event, on Friday 22 May, will look at the changes affecting the Wealth Management industry and what this means for its future. Student members can book their place here.