London is set to become one of the least affordable cities in the world, along with Tokyo, Tel Aviv and Paris, according to a new report.
Economics forecaster Oxford Economics said that over the next 15 years London will become a global “megacity” with a population of 10 million people.
The report on London’s prospects, published today, warned that London is likely to fall into recession at some point this year. But it expects the impact to be less painful than elsewhere in the UK because of “relatively high levels of household wealth” plus less reliance on troubled industrial sectors.
London’s economy will thrive, 600,000 high quality new jobs will be created, and its wobbling housing market will also recover — to the extent that an average owner will soon need to borrow 12 times their annual salary to buy a home (compared to a UK average of eight).
“The UK economy should start to grow again in quarter four 2023 and we expect London to lead the recovery and outperform its major European competitors over the medium to long term,” reads the report.
This prosperity will boost the housing market with price growth returning in 2025 after a two year hiatus, found the report.
Whilst good news for homeowners this is bad news for those attempting to climb onto the housing ladder. “As prices begin to rise we expect the house prices to earnings ratio to hit 12,” warned the report.
Lucian Cook, head of residential research at Savills, welcomed the upbeat appraisal of London’s economic future. But he warned that unless housing supply can be increased significantly the capital’s progress will be hampered. At present the number of new homes being completed in the capital each year is underperforming targets set out by the London Plan to the tune of around 20,000 homes per year.
“On the one hand what you have got is a very positive economic picture for London,” said Cook. “But that is not being matched in the supply of new homes. That continues to put upward pressure on house prices and rents.
“One of the risks to London’s economic success will be its ability to attract graduate talent because of its housing costs.
“What is the solution? You have to deliver more new homes in London across a variety of tenures and price points and invest in upgrading transport infrastructure in the commuter areas too.
“If we fail to do that it will affect London’s economic competitiveness.”
