Soaring London house prices are costing the economy more than £1bn a year and preventing the creation of thousands of jobs, as individuals plough money into buying and renting instead of spending their cash elsewhere, a report has claimed.
London’s housing market recovered quickly from the financial downturn of 2008-2009 and in recent years rents and house prices have rocketed. House prices are more than 46% above their pre-crisis peak, at an average of £525,000 according to the Office for National Statistics, while rents in the private sector have risen by a third over the past decade.
The report, by business group London First and consultancy CEBR, found that workers in many sectors were now priced out of the capital, while companies were being forced to pay more to attract staff and help them meet living expenses. The report said there was a knock-on effect on consumer spending, with money being spent on expensive mortgages and rents rather than other goods. It said as much as £2.7bn could have been spent elsewhere in 2015 if housing costs had kept in line with inflation over the past decade. This additional spending could have supported almost 11,000 more jobs, and meant a boost to the economy of more than £1bn this year.
Workers in shops, cafés and restaurants, and those performing administrative office roles would have to pay their entire pre-tax salary to rent an average private home in London, the report found, while social workers, librarians, and teachers faced rents equivalent to more than half their salaries.
It said only the best-paid workers, including company directors and those working in financial services, earned enough to rent in central London “affordably”; that is paying less than one-third of their salaries on housing.
“The housing crisis is making it difficult to attract and retain staff in retail, care and sales occupations,” it said. “Even if they spend a limited amount on other goods and services, they are effectively priced out of living independently in the capital. They need to co-habit with partners, friends or family, or be eligible for social housing in the capital.” …..