London needs two million extra homes to avert crisis

Click to follow
The Independent Online

Almost two million homes must be built in London and the South-east over the next two decades to avert a drastic housing crisis, a group of economists warns today.

Almost two million homes must be built in London and the South-east over the next two decades to avert a drastic housing crisis, a group of economists warns today.

A massive shortage of properties will force up prices so fast that it will cost the average household £3,180 a year extra just to meet their mortgage costs, the Centre for Economics and Business Research said.

The report comes ahead of a major report on population growth later today from the office of the Mayor of London, Ken Livingstone, which is expected to contain equally alarming forecasts.

The CEBR said the capital's population is set to rise by 1.25 million over the next 20 years while the rest of the South-east of England will see an extra 1.5 million inhabitants.

"A housing and infrastructure time bomb is ticking away under London and the South-east," said Douglas McWilliams, the head of the CEBR. "Without urgent action to force planners to adopt a much more accommodative attitude to housing it is likely that the bomb will explode."

The CEBR estimates an extra 860,000 homes are needed in London and an additional 990,000 in the rest of the South-east – equivalent to an extra 93,000 homes across the combined area every year.

The shortage of new homes will translate into further rises in property prices. It said that by 2021 the proportion of household income needed to fund a mortgage would have surged from 17 per cent to 30 per cent in London, and from 16 per cent to 28 per cent in the Home Counties. CEBR said this was equivalent to an extra £3,180 a year.

Figures from the housebuilding industry show that the new of new homes built in 2001 has fallen to a 70-year low. Builders blame restrictive planning laws.

This has fed into strong rises in house values over the last year and according to the latest figures prices are now rising at their fastest rate for more than 12 years.

This has made it very hard for the young and the moderately paid, such as key public sector workers, to get a foot on the bottom rung of the property ladder.

Last week research from Halifax, the UK's largest mortgage lender, said the average first-time buyer in London was aged 34, had £34,000 to put down as a deposit and was buying a home worth £161,000.

Comments