There have been several headlines about London property this week.
They are all along the same theme:
“Unaffordability of London homes is ‘off the scale!” is my favourite.
And this is despite the fact that affordability levels in London have improved faster than any other area of the country in the last year.
Anyway, this is what Bloomberg had to say about the figures released by the Office for National Statistics (ONS):
“Kensington and Chelsea in West London was the least affordable area, with the median price paid for a home over 34 times average annual earnings, followed by Westminster and the Richmond upon Thames.”
34 times average earnings is a hell of a lot and you might be wondering how anyone – even someone earning £10m per annum – could afford a property that is 34 times their earnings. And let’s be clear, there are more people earning £10m than there are £340m properties floating around.
So, would it be unreasonable to suggest that this data is somehow flawed? Fortunately, the ONS admits that:
“The data was based on earnings of people working in the area rather than those of residents”.
In other words, the data is remarkably misleading if not totally useless. But, hey, it makes for good headlines, so who cares…?
In global terms, property in Kensington & Chelsea, Belgravia, Mayfair, etc. is actually a lot cheaper than it was 120 years ago. A large house in Belgravia would have cost you c. £20,000 back then, but that was an astronomical sum and the pound was the reserve currency of the world.
China and Russia were economic wastelands as was Africa. The USA was booming but the time it took to travel here by boat meant that there were very few US owners of London property. Spain was recovering from famine and a war they lost to the USA. Singapore was part of the British Empire.
In short, the world was a much smaller, poorer place and property in prime central London was out of reach even for the wealthiest families in many countries. That is no longer the case as the value of sterling has declined while, more importantly, global wealth has exploded.
There are more people making more money in more jurisdictions than at any time in history.
And London is still one of the greatest – and if you believe most of the research, still the greatest – city on the planet. This is why looking at local earnings in relation to the affordability of property when it comes to prime central London, other global hubs, the best ski and beach resorts, etc. is not a particularly accurate reflection of “affordability”.
This is just one, admittedly obvious, example of false information that buyers are often influenced by or, worse, rely on. I revealed several others in a talk I gave for one of the world’s largest investment banks.
If you are planning to acquire a property in London, it is essential that you have accurate information so that you can make an intelligent decision. This means knowing exactly what is happening to prices in your target areas and price range.
And more specifically, what is happening to prices for the type of property you wish to buy, e.g. prices for houses may be very different to apartments… and apartments in new developments may be trading very differently to newly refurbished apartments in traditional buildings.
If you do not have a forensic understanding of this would it be unreasonable to say that the chance of you finding the best property your money can buy and acquiring for the lowest price possible is rather low?
So, if you would like more accurate information or have any questions about acquiring a property in London, simply email or you can call 02034578855 (+442034578855 from outside the UK).
