The fundamentals behind London’s current housing crisis and potential solution?

IntroductionThe c one timession go out consider the trapping fundsmaking(prenominal)ise within capital of the United Kingdom, fabricateing close attention to the accommodate policy and macro-economic conditions that name take to the current crisis within the citys lodging trade. It could be argued that a current lightage of housing maturements, importantly in the more(prenominal) in big-ticket(prenominal) range, coupled with a scend in international real-estate investment funds in the city has caused a major shortage, leading ultimately to bell step-ups and so a divergence from housing markets within the North of the UK (Dyson, 2014) Online.This assignment go out first touch upon the policies that nominate led to this problem ahead looking into the recent macro-economic trends which have aggravated the issue, get-up-and-go into the spotlight.The UK housing market has for some time been impacted by poor housing policy, with many a(prenominal) arguing that lev els of pertly construction have been unable to meet the surge in population growth and so guide for new houses. small-arm this has become a more national problem, the south of Eng prop up, most notably capital of the United Kingdom has witnessed the greatest affect (Myers, 2012). space Overview succession the population of capital of the United Kingdom has continued its growth devoted its rise in status as a spheric business hub, housing developments have been unable to tot the market with enough new properties, as soundly as properties which locals take hold cheap. composition it can be noted that there are currently some significant developments within capital of the United Kingdom such(prenominal) as the Battersea Power Plant regeneration, many have commented that these ?Million properties are organism built with the wealthy oversea investors in mind over local buyers granted that the expenditures asked are far out of reach of many workers (Renshaw, 2013) Online. Wh ile local councils have assay to resolve this issue by pushing all developers to include a percentage of affordable homes in their plans to succeed planning permission, many of these new developments are still primarily accommodate at the high-end of the market with many developers advertising their properties in international markets (capital of the United Kingdom First, 2014). This, on with major regeneration plans in some areas which has prioritised mercenary/ retail space over residential, has seriously restricted the capableness for new housing for the local market and supported the monetary value increases seen over the geezerhood. Furthermore, the profound boroughs of London are similarly restricted by the availability of land to develop new homes, with new developments pushing higher for greater root word space. While this has become a popular method in London with new skyscrapers such as The Shard, these developments have usually favoured office and retail space o ver residential (Ball et al, 2012). What could be considered here is the desire by boroughs within London to re-generate and effectively create local centres to compete with the main areas of London. There has been significant discussion over the years regarding the downfall of the UK high-streets as out of town competition and online obtain reduces the posit for typical bricks-and-mortar memorys in London the main issue for some could be the easy accessibility into the city centre and so the main shopping and entertainment districts. With this, local boroughs have prioritised the development on new commercial and office space in a bid to realise the one-on-one investment that would be needed to support larger regeneration plans and attract more people into the area, however as mentioned previously given the short release of available land in some central boroughs this has led to an opportunity cost between residential and commercial development.London CrisisThe main issue for the market is a simply supply and penury crisis basically the market is severely under supplied, with prices been pushed up by the consumers allow foring to pay a higher price for the blank space. This has created a situation where the supply of affordable housing is quite inelastic and so any notable increase in demand will only result in the price moving higher. This has withal led to another affect whereby prices have as well as increased strongly in the wider due south-East area as commuters test property in lower price areas with strong transport connections into London.The supply crisis has also been heightened by another issue namely strong international demand for property in London as an investment opportunity and store of wealth (Tower Hamlet Citizens, 2014). In 2008, the financial crisis hit global political economy and memory board-markets. With this, investors sought for new safe-havens for their wealth as global stock markets remained volatile and the value of other havens such as favourable fell. spot or investments in brick-and-mortar have always been popular, especially in economies corresponding the UK where the market has remained buoyant over a result of years (Berry et al, 2011). London especially appealed to investors given its stock of high-value properties, increasing population, global image as a destination for the wealthy, falling corporation tax as well as a weakening currency which made investment into UK property cheaper for international investors. The economics behind this move has largely been driven by the desire to reduce risk but maintain returns on investments given that London house prices were increasing at above 10%p.a (ONS, 2014), investors who had once favoured holding their cash in stock markets and commodities such as gold quickly moved their money into property as a store of wealth. This movement has recently been reversed to some extent as a strengthening ?GBP and improving global outlook have decrea sed demand for high-end properties in London at a time when a wave of new supply is hitting the market (Titcomb, 2014) Online.Potential SolutionsMoving forward, a make sense of factors have been put forward to help deal with the issue, management on new regulation and opportunities (London First, 2014). In terms of opportunity, London has been working(a) to improve transport connections with wider area in a bid to free up more areas to potential commuters, essentially increasing the stock of housing that is available to anyone working within London, (Emmett, 2014). This would then lead to an increase in supply, which should help decrease prices. Notable projects include the Crossrail development, an ?18Billion transport project that will decrease commuter times into central London for a number of local boroughs (Crossrail, 2014) Online. The proposed HS2-HS3 (high-speed rail) projects could also been seen as a new opportunity enceinte more businesses the chance to open offices, facilities in other major UK cities such as Birmingham, Manchester, Leeds etc. while still having access to London. The main advance on this is that it would move some business away from London as so reduce demand for housing from workers. Furthermore this project has also been seen as a way to reduce the heavily debated North/South divide within the UK, which in turn may help relegate align house prices between the two. In terms of regulation, a number of London boroughs have sought to effectively force developers to include affordable housing within their plans to be granted planning permission (Besley, 2010). inclined this, new developments such as the Battersea Power Plant have include some affordable housing within their plans, however as they only account for 15% of total home some have argued the legal community doesnt go far enough to solve the supply issues (Robertson, 2014) Online. In economic terms, local boroughs have identified the profitability that developments in London provide by asking developers to include some affordable housing within their plans they have affected the Net Present Value (hereafter NPV) or potential payback of the project, however given that projects are still creation announced in the city it appears that developments still remain profitable for these companies. It could be argued by some that these new demands from the local authorities could be seen as interference within the free market, effectively using the private arena to provide a good (e.g. new homes) that the public domain has failed to provide. What this search must also consider is that if that the public sector have through with(p) little themselves to attempt to resolve this issue, most probably down to a lack of capital and experience necessary to move forward with these large developments and so requiring the need for the involvement of the private sector. As mentioned beforehand, the private sector will be driven by the eventual profitability or NPV of these projects and so local authorities must ensure that they still cease these profits to be made while also attempting to resolve the housing crisis. According to data from the ONS, home prices in London are up 31.6% above their 2008 peak, while those in the North remain under the 2008 level, (ONS, 2014). gag law RemarksTo conclude the essay has shown that housing policy in London could have been seen as failing for a number of years as demand from a rising population has outgrown the level of new supply, pushing prices up much higher than the UK average (Savills, 2014). The issue has intensified recently as the global economic crisis increased the desire for international investors to hold their money in property, with London seen as a prime market given the weaker value of the ?GBP could with continuous price rises. While the essay has noted a number of initiatives underway to help increase supply and reduce demand, the potential impacts may be small and seen in a long- term scenario. While there is new infrastructure underway to improve the competitiveness and draw of a wider London and also wider UK area the Crossrail development will not come online until 2018, while the high-speed rail links are not current expected until after 2020. Furthermore, while local boroughs have attempted to increase regulation and push more affordable housing into development plans, these are only small percentages, with some people disagreeing on what will be deemed affordable. Moving forward the main issue for London will be developing the land that it currently has spare in the ruff way possible to accommodate its rising population but also its rising status as a global business hub in this case, higher residential housing prices may be needed for developers to confirm their construction over commercial or office space.ReferencesBall, M, Lizieri, C and MacGregor, B (2012) The Economics of Commercial Property differentiateets, London, Routledge.Berry, J, Deddi s, N and McGreal, W (2011) Urban Regeneration, Property Investment and Development, London, Taylor & Francis.Besley, T and Ghatak, M (2010) Property Rights and Economic Development. 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