London homes are the second most over-priced in the world, according to a recent report by UBS Wealth Management. UBS puts London closely behind Vancouver in its “bubble risk rating” due to house prices having risen by 25 per cent since the end of 2014. What this means is London has the second most over-priced property market. This is mainly the result of foreign investment and low interest rates which are not consistent with the performance of the real economy.
London's housing bubble is also the second-least affordable in the world after Hong-Kong when taking into account increasing house prices and average earnings, according to the Swiss Bank report. The question is: what can be done about it?
If there was one solution to the housing crisis, it would be well underway. The city's biggest problem stems from a variety of causes: a lack of space, overcrowding, financial strain, cost of living, foreign investment, interest rates, housing associations… the list goes on. Building new homes will not solve the capital's issue because those homes will still not be accessible by most Londoners.
We need to look at a number of short-term alternative solutions.
We all know the score. Developers make more money selling high-value properties to foreign investors than they do in championing cheaper housing. But we need affordable options, and fast.
The city is welcoming innovative solutions to offer prefabricated affordable housing. Recent examples include YMCA's Y:Cube - modular flats built in South London. These micro homes cost around £45,000 for a one-bedroom apartment. Container City in the Docklands offer reconstructed shipping containers at 65 per cent of the market rate, around £145 a week.
Micro-housing is far from new and has the potential to provide real access for people to the city, but such solutions face problems of planning permission and land purchasing or leasing. Whilst the enclosures themselves may be cost-effective to build, land in London is at a premium, saddled upon the homebuyer.
Building on Green Belt and Brownfield sites
We need to find ways to build affordable housing by re-engaging with the value of land in our city.
Housing authorities need to relinquish the 70-year old law protecting green belt land within the M25, that currently acts as a safe zone for agriculture and greenery. Coupled with building on brownfield sites - land previously used for industrial or commercial purposes - our country could go a long way in creating two and a half million homes, which would vacate space and invade less than 0.5 per cent of English soil.
Bringing empty properties back into use
According to the Empty Homes charity, more than 50,000 properties sit empty in London. We need to find ways to bring the high number of empty properties back into circulation.
For example, local authorities can take more ownership of these properties gathering dust and use them for housing or rental purposes, even if it's through applying pressure on the government to deregulate and soften housing laws. The Empty Homes Premium, which gives councils the ability to charge home owners 50 per cent more council tax if they leave properties empty for two or more years, has not been enforced enough.
Many young professionals are discovering new ways of living by utilising vacated properties. An example is the Property Guardianship scheme, which takes a vacant building and places a "guardian" into it. The vacant building can include anything from ex schools, care homes and pubs to empty flats. And the person living there can pay as little as £350 per month for a central London location.
The issue of the housing crisis is so complex and entwined in every part of society that we need to look at options that rebuild new properties, inhabit current ones, empower housing authorities, regulate interest rates and foreign investments and develop ergonomic mobile homes on available land. Only then can we begin to be proud of our city's housing structure once again.