London homes still horribly expensive for first time buyers

 
Allister Heath
FIRST, the good news: the housing market is becoming less unaffordable for young people across the UK. The average price paid by a first-time buyer in June was affordable for someone on average earnings in 54 per cent of all UK local authority districts, the highest proportion for 10 years, according to the Halifax. At the peak of the madness in 2007, this was only true of seven per cent of districts.

A home is deemed affordable if it is worth no more than four times the gross income of someone on average earnings in the area; the housing market is gradually moving more into sync with earnings.

But it’s not all good news. Just nine per cent of all affordable areas were in southern UK – even though that is where so many of the jobs are. First time buyers in London had to put down the largest deposit (£59,221) to secure a property, followed by the South East (£34,843). It was just £16,753 in the North of England. London accounts for nine of the 10 least affordable districts (Oxford is the second worst); the worst is Brent, where first time buyers’ prices are 8.8 times gross earnings in the area. The next most expensive London district for first-timers is Harrow, followed by Hammersmith and Fulham, Hackney, Haringey, Camden, Ealing, Hillingdon and Hounslow in 10th position.

There is only one solution: the government needs to liberalise the law to allow far more private homes to be built, in London itself but also in commutable reach. First time buyers need thousands more homes – in many cases family houses, not just tiny flats. The present, scandalous lack of supply is a blight on modern Britain.

PUNISHING FAILURE
IT is pleasing to see that G4S looks as if it will be paying for its pathetic and inexcusable Olympic incompetence. Its share price is down, it is being hit by penalty fees and will make a loss of £35-50m on the £284m contract. Its CEO could be on the way out and the firm’s reputation has suffered a major blow. The government did recently renegotiate its contract, massively increasing its order for security staff, but G4S should have said so at the time if it felt it couldn’t deliver on the new terms. G4S – the company once known as Group 4 Security, a brand sullied by prisoners’ escapes – has also damaged itself with its woeful communications effort.

The whole point of governments hiring private contractors is not only to save money but also because those that fail can be penalised or fired. When a public sector body fails – as they do frequently – they can’t meaningfully be fined (it’s already the taxpayers’ money) and it is much harder or entirely impossible to fire them.

It is also interesting that public sector failure tends to be rationalised away as caused by “under-funding” but the failure of a private sector contractor – even though they tend to operate on smaller, leaner budgets – are greeted much more harshly. One reason for this is that the public sector is deemed to be “nobler” than the private sector, presumably because the former is not for profit and the latter is profit seeking. That, of course, is nonsense: what counts is what works. In this case, G4S hasn’t worked and is rightly being held accountable, by the customer for whom it failed to deliver, by the media but also by the City. One key force for accountability is the stock market: there is nothing that angers investors more, and that encourages them to scrutinise their CEO’s actions, than a tumbling share price. The public sector doesn’t have such an inbuilt alarm bell – and that is yet another reason why it tends to respond so slowly to failure.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath