London housing prices are expected to increase by more than 40 per cent in the next six years due to a stagnant house building market.
In the EastLondonLines boroughs, Hackney and Lewisham are expected to have the biggest increase in housing prices, with 49 and 47 per cent increases respectively.
Prices are expected to rise by over 30 per cent in Tower Hamlets and Croydon.
Oxford University economists, who released the report called ‘Home Truths’ on behalf of the National Housing Federation, made the prediction this week.
The report warns that the average cost of a home in the capital will be almost £650,000 by 2020 and that a new generation of young Londoners will not be able to get on the property ladder.
Lizzie Clifford, London chief for the National Housing Federation, said the forecasts would leave another generation “locked out and reliant on taxpayers to keep the roof over their head from one month to the next.”
According to the report, house prices and rents are soaring, and have been soaring for decades, because “successive governments have failed to invest in enough homes to meet demand.”
The report also states: “Increased house building in areas that need homes drives local economic growth further and faster than any other industry.” For every £1 spent on housing a further £2.41 is generated and 2.3 new jobs are created.
Hackney’s housing market has struggled to keep up with the borough’s population increase. The 2011 census shows Hackney’s population has increased 21 per cent since 2001 and is expected to grow by over 48,000 in the next 20 years.
According to Hackney council, 1,000 homes have been built in the borough each year since 1981 and almost 25,000 more are expected by 2026.
Councillor Guy Nicholson, Cabinet member for Regeneration in Hackney said that better transport links, improved schools and cleaner streets, have increased housing prices.
He said: “Rising popularity and demand drives up the cost of homes both to rent and to buy which is why the Council is focusing on using the resources it has to make sure that there are affordable homes built in the borough.”
Hackney housing prices are expected to rise at a higher rate than any other EastLondonLine borough.
Lewisham, which has the highest percentage of commuters out of all London boroughs, will see the highest increase in house prices out all the boroughs.
However, the borough’s current average house price of £302,235 is well below the London average of £457,940 according to the land registry.
In Croydon, house prices have increased by £56,548 over the last ten years, which is less than 44 per cent of the average increase for London.
Tower Hamlets is undergoing rapid housing growth and is the fastest growing borough in the capital, according to the 2011 census. Although the number of homes in the borough is increasing by over 3,000 per year, it will not cater to the borough’s growing population.
Chancellor George Osborne spoke about London’s housing problems in last week’s Autumn Statement. The Chancellor said more restrictions on the housing market would be needed to ensure a responsible recovery.
Simon Rubinsohn, the chief economist at the Royal Institution of Chartered Surveyors, said the extensions will not solve the housing shortage problem in response to the Autumn Statement:
“As we’ve been saying for a long time, the lack of housing supply is crippling the property market. If Help to Buy is to remain, Right to Buy extended, and expensive social housing sold off then the Government’s commitment to building houses simply must be extended.”