True but not important

London’s housing crisis will cost the capital almost £3bn this year in lost consumer spending, according to a major new study on the economic impact of the homes shortage.
Crippling rents and mortgages in the capital – where house prices have doubled in a decade – will result in the “unnecessary” loss of £2.7bn from the consumer pay packet in 2015, according to research carried out by the Centre for Economics and Business Research (CEBR).
The sum represents 1.6pc of total consumer spending in London and amounts to a combined loss of £14.5bn in economic output over 2006 to 2020.

1.6% of consumer spending? Or well under 1% of London’s GVA?

Meh, who gives a shit?

41 thoughts on “True but not important”

  1. Without even bothering with the dodgy rent figures – they appear to be ignorning the huge distortion by a tiny number of postcodes, and their repeat of the old “soaring London rents trope” *, wtf do they think the people who collect the rent do with the cash?

    Put it under the mattress? Or spend it in the economy?

    Campaign for better planning, but don’t resort to Guardian style hysteria.

    * Report just published for the London Assembly shows rents behind both wages and inflation since 2008.

  2. Those rents and mortgages aren’t lost to the economy – they’re just going elsewhere. Every tenant has a landlord, whose spending power is increased by the rents received.

  3. Yeah, I know, anecdote alert!

    My daughter shares a flat with two friends. Living in the Whitechapel Road area. £700 quid each all included.

    Expensive? Yes. But for a 22 year old in her first job as an intern where they pay her £1,400 gross she is happy. Close enough to walk to work (when the weather’s good) as the office is on the Thames.

    Took her a week to find the place in a reasonable modernish block, ‘multicultural’ friendly area. Supermarket next door with out-of-London prices.

    So she’s living in the cheap Monopoly area? No money left over at the end of the month?

    From my point of view she is doing just fine. Even with London rents.

    And she won’t be there for ever.

  4. “Every tenant has a landlord, whose spending power is increased by the rents received.”

    Or possibly a landlord who shovels it straight back to the bank in loan interest, meaning it’s journey back towards the lives of ‘ard workin lahndanars is a little more arduous.

    Has London’s economy grown in line with it’s housing costs? Hell no. Not even almost. So let’s not pretend it’s trickling back down to the community.

  5. @”My daughter shares a flat with two friends. Living in the Whitechapel Road area. £700 quid each all included.”
    That sounds appalling to me, I know people who have never worked who have a flat near there for free and they have money for expensive holidays.

  6. Just build on Hyde Park FFS. The place is a dreary bog at the best of times. Time to move it to a higher-value use.

  7. Stop importing people into London. Both foreign migrants and by building costly rip-offs like the HS2. Which will just make London ever-more the centre of the Universe for idiots.

  8. The Thought Gang said:
    “Or possibly a landlord who shovels it straight back to the bank in loan interest, meaning it’s journey back towards the lives of ‘ard workin lahndanars is a little more arduous.”

    Easy. Bank uses it to pay bonuses to City workers, who use it to buy drugs from their dealers. Straight back into the local economy.

  9. Matt Wardman said:
    “* Report just published for the London Assembly shows rents behind both wages and inflation since 2008.”

    That’s fascinating – I hadn’t realised the whole “rising unaffordability” thing was actually outright crap.

  10. That’s government accounting, that is: hypothetical money not received but which you imagine you could have received is a “cost”.

    My next-door neighbour didn’t give me fifty grand yesterday. Where the hell am I going to find that sort of money? Even worse, next week I’m pretty sure they’re not going to give me a hundred grand. I might have to sell the house.

  11. ” My daughter shares a flat with two friends. Living in the Whitechapel Road area. £700 quid each all included.”

    Up until relatively recently, that area would have been classed as a slum.

    I visited a flat in Malaga City, last week. Three generous bedrooms, massive lounge, two bathrooms & kitchen. And a laundry room. Sizeable terrace. About 15 m3. It also has a parking space in the dual level car park. Rent’s around £400 p/m
    The apartment block’s built on an area would roughly correspond to a London “block. But, by building 9 high, the core is an open space with gardens, a play area for kiddies with swings, a slide etc, a full size swimming pool & an all purpose sports court.
    I didn’t mention the top story apartments with their more extensive terraces, did I? Or the elevators? I think there’s 10. Or the camera entryphone system.
    This isn’t rich people’s housing. This is normal.
    Brits? Barking.

  12. Another thing to think on.
    “Property developer*” I’m dealing with. He’s just finished some maisonettes, way out in London’s commuter land. Two bedroom apartments will sell for £300K+. The unit cost to build was £80k. I know the plot. Shite. No-one had any interest in building on it in 60 years. Until now.
    *Property developer. Hate that expression. All you need to build homes is a builder with the skills & tools & a buyer with the money to pay him.. “Property developers” are just leeches with preferential access to the credit creation boondoggle. They serve no useful purpose.

  13. BiS

    £400pcm? That’s nothing. I can get you somewhere twice as big for half the price if you don’t mind living in Hartlepool.

    As they say – Location, Location, Location. Slightly more people want to live in London than Malaga: more Spaniards moved to London in the last six months than live in Malaga.

    Recusant
    Proud Resident of Kensington

  14. BiS

    ““Property developers” are just leeches with preferential access to the credit creation boondoggle. They serve no useful purpose.”

    Or, as it’s also known as, providers of capital.

  15. Someone published a piece recently pointing out that it’s cheaper to live in a beautiful residence in Spain and commute to London than to live in some crappy London shoebox. (Obviously, daily flying time is a bit of a problem. They were making a point about prices rather than a serious suggestion.)

  16. No. It’s density. Density. Density.
    And whilst Londoners are willing to squat in rabbit hutches converted out of Victorian jerrybuilding, it will continue to be so.
    And I’m speaking as an ex Kensington resident.
    Shitehole. And I lived in a better part.

  17. “Or, as it’s also known as, providers of capital.”
    Bollocks.
    Property developers don’t have capital.
    It’s borrowed.

  18. “Where house prices have doubled in a decade”

    Strange, for the Telegraph this is often something to be celebrated.

  19. Well true SQ2
    And if we all get on the phone to Wonga a borrow a few quid we can all say we’re capitalising the drinks retail industry & feel proud of ourselves.
    Where as in actuality, in our advanced economic system there doesn’t seem to be any actual capital actually anywhere. The property developer scum borrow it off the banks who get it from credit creation secured against ever increasing property prices fueled by….you guessed it.
    Oddly enough, those Victorian terraces were originally built using actual money. Incredible, isn’t it?

  20. The slight animosity you here is prompted by the conversation I had with the property developer. Who wishes me to invest in the next round of maisonette building.
    My response being, “If I wanted to invest in building houses in the UK, I’d build a few.
    WTF do I need you for?”

  21. > And if we all get on the phone to Wonga

    Shite example, since they’re who you resort to when you can’t get credit elsewhere on better terms. The whole point of people who fund business through credit is that they can get better terms than the business can get without them, not worse.

    > The property developer scum borrow it off the banks who get it from credit creation secured against ever increasing property prices fueled by….you guessed it.

    This is nonsense. The capital of a house-build is the house. Credit can be used to bridge the gap, paying for something to be built on the understanding that, once it’s been built, it will provide enough collateral to cover the credit. This is hardly unique to house-building. And yes, obviously it involves a risk that the thing will not be built, which is why there’s interest on the credit.

    You don’t need ever-increasing property prices for this to work. You just need finished houses to sell for more than it costs to build them.

    > in our advanced economic system there doesn’t seem to be any actual capital actually anywhere.

    Really? None? Gosh.

  22. Yes, SQ2
    It’s precisely that, I’m objecting to.
    “And yes, obviously it involves a risk that the thing will not be built, which is why there’s interest on the credit.”
    As if that’s the only risk.
    I’m minded the major risk is the thing won’t be worth the sum borrowed, the other side of the major property crash brought about by over-extension of credit.
    Because I’ve been living in a country where this happened. Property developers going bust & leaving banks with assets they can’t sell.
    UK market’s ripe for it.
    Why I wouldn’t dream of investing in it.
    Why I’m liquidating what interest I do have in it.

  23. “You don’t need ever-increasing property prices for this to work.”
    But you do need ever increasing property prices for it to work.

    As far as the SE’s concerned, all house prices are discounting further house price rises.
    That’s what people tell themselves, isn’t it? Must get on the property ladder to benefit from future rises. So that nearly unaffordable mortgage becomes an “investment”.
    A market like that cannot have a plateau. if prices do not continue to rise, they must fall. Because prices will no longer have future expected gains to discount.
    Crash.

  24. Bloke in North Dorset

    BiS,

    That’s exactly what John Paulson describes happening in the USA in 2006 which led him to betting against the market, to everyone’s amusement, and turning a £40bn profit.

  25. bloke in spain,

    “Why I wouldn’t dream of investing in it.

    Why I’m liquidating what interest I do have in it.”

    A lot of the UK is fine, but London and the South East is a bubble waiting to blow. I have no idea what the demand is for people there. I’m getting calls about work in London that aren’t paying any more than I can get in Gloucestershire. And why would they? You can write code anywhere now. Or do most legal work anywhere. Or most branding/media work. That’s high value stuff, which makes me wonder what stuff is requiring 8 million people. They aren’t all running hedge funds.

  26. > There are plenty of houses in London, we just pay people who shouldn’t be living in London to live there.

    Ah, “shouldn’t”. It’s so annoying when people don’t follow The Plan.

  27. BIS,

    > But you do need ever increasing property prices for it to work. As far as the SE’s concerned, all house prices are discounting further house price rises. That’s what people tell themselves, isn’t it? Must get on the property ladder to benefit from future rises. So that nearly unaffordable mortgage becomes an “investment”.

    You were talking about property developers. Now you’re talking about people getting on the property ladder. My comments applied to the former, not the latter.

  28. There are plenty of houses in London, we just pay people who shouldn’t be living in London to live there.

    Ah, “shouldn’t”. It’s so annoying when people don’t follow The Plan.

    ‘Shouldn’t’ is a perfectly fine value judgment to make if you are one of those who is being forced to pay for those people to live there. I don’t believe we have the right to tell anyone where they should live (all other things being equal) if they’re funding it themselves. If we’re funding it partly with our cash we probably do have the right, if only in a venting-on-a-blog sense.

  29. > I don’t believe we have the right to tell anyone where they should live (all other things being equal) if they’re funding it themselves. If we’re funding it partly with our cash we probably do have the right, if only in a venting-on-a-blog sense.

    Honestly not sure I see your point here. My flat in London is part of the package my employer offers me. I pay for it via far lower salary than I would get if I was actually based in London. My employer pays the council tax etc — again, obviously this is reflected in my salary. London residents arguably pay indirectly via higher housing costs due to increased competition — but my employer also has to pay exactly the same increased housing costs.

    And then we could take a look at the constant massive government infrastructure spending in London paid for out of the taxes paid by people who don’t live there, and maybe conclude it’s swings and roundabouts. I mean, the large number of people who don’t live in London and rarely even set foot in the place have a big chunk of their income tax taken to make sure no Londoner ever has to wait more than a few minutes for a train, while themselves living in places with utterly fucking shite transport for which there is apparently no money to improve, or sometimes even maintain. Crossrail is, we are told, extremely important, yet getting from Edinburgh to Belfast — that’s two capital cities — still involves getting stuck behind lorries on winding country roads.

    Although that’s not really a fair comparison to the point you’re making, because you’re not talking about Londoners actually paying money directly to support non-Londoners’ stuff, but merely the indirect payment of having higher rents in a place where housing supply is affected by “outsiders” living there. If we’re talking about that, then surely we have to take into account the large number of places in Britain — swathes of East Anglia, for a start — where the locals have been driven out by rising property prices caused by Londoners’ second homes. They don’t have merely higher house prices which they can afford but are annoyed by; they literally cannot afford to live in their own communities. Local councils have had to set up quite expensive schemes to try and counter that. So that’s rural council taxes being used to pay for the effects of Londoners’ holiday homes. Nice.

    And of course the very existence of such people highlights the inherent absurdity of what you’re talking about. Tell me, what exactly is the difference between someone who lives in London but likes to go away to the country at weekends and someone who lives in the country but goes to work in London during the week? Or do you believe that Londoners “shouldn’t” leave the city at weekends?

    And yes, London generates more money than the rest of the country — but it is only able to do that because so much of the rest of the country (not to mention other countries) come to work in London. If all the people who “shouldn’t” live here left, the place would be fucked.

  30. Honestly not sure I see your point here.

    ‘anon’ said: ‘There are plenty of houses in London, we just pay people who shouldn’t be living in London to live there.’

    You said: ‘Ah, “shouldn’t”. It’s so annoying when people don’t follow The Plan.’

    By this you seemed to me to be criticising ‘anon’ for expressing an opinion as to whether ‘we’ should pay for people to live in London who ‘shouldn’t’.

    I merely point out that it is no business of anon’s, or mine, whether anyone ‘should’ live in London if he lives there as a result of a private arrangement between himself and a bank, or a landlord, or an employer.

    But anon’s use of ‘we’ as being the people who ‘just pay’ for people to live in London suggested (to me) that he was talking about those who are funded to live there by ‘us’, not by private arrangements between those people and a bank, or a landlord, or an employer.

    Given that the ‘we’ in anon’s comment are paying, it doesn’t seem unreasonable for the same ‘we’ to have thoughts as to where those people should live.

    There are vast numbers of permanently unemployed people in London, and vast amongs of cheap housing in the north of England. Perhaps the twain should meet (we should do it via incentives rather than enforcement, of course).

  31. “You were talking about property developers. Now you’re talking about people getting on the property ladder. My comments applied to the former, not the latter.”
    What a curious comment.
    How do you separate the players in a market from the market they’re operating in?

  32. You know, looking back at that, I read anon’s comment in the context of Stigler’s comment, since it came right after it and followed on nicely from it. But, considered by itself, anon might well have been referring to people on benefits. If so, none of my rant applies.

  33. > How do you separate the players in a market from the market they’re operating in?

    Apparently, just as easily as you conflate them. Anyway, they’re two markets: primary and secondary. My house is 100 years old. My buying it had fuck-all effect on any property developer anywhere in the UK. Yes, if no-one ever bought a second-hand house for some reason, the primary market would be many orders of magnitude larger than it is. I think we can safely ignore the effect of that not happening, since it’s nonsense.

    I’m going to grab very approximate figures out of the air here. Say you can build a house for £100k and sell it for £150k, and it takes about a year from starting to selling. Say house prices decrease over that year by 20% — which would be regarded by our political class and people obsessed with moving up the property ladder as sky-is-falling time. The property developer would still make £20k profit.

    The kind of constant large house price increases that the British are hooked on (and of which I am a critic myself) simply are not required for property developers to make money. Property developers do not make money from the price increase of an unchanged house over a long time; they make money off the margin between the cost of building a house and its price when built over a short time.

    Yes, there are property developers who do not build from scratch, but merely improve what’s already there. Still, they make money off the margin between the cost and the value of what they do. Yes, in a fast-rising market, there are some amateurs who think it’s easy money and don’t do it very well. As Sarah Beeny has often pointed out, the difference between an actual property developer and some chancer who fancies giving it a go but doesn’t know what they’re doing is that the property developer still makes a profit on their work in a falling market.

    The secondary housing market obviously does affect the primary house-building market, but, so long as we have housing shortages and an artificially restricted supply, that effect isn’t going to get anywhere near crippling it.

    The house two doors up from me was bought and done up by a developer. I assume credit was involved — his whole family moved in while he did it, so he clearly wasn’t swimming in enough spare cash to buy multiple properties. Since the place was structurally unsound — huge visible cracks in the supporting walls — and we live in a row of terraces, I would strongly dispute any claim that what he did had no value.

  34. @Squander Two
    “But, considered by itself, anon might well have been referring to people on benefits. If so, none of my rant applies.”
    I was referring to people on benefits. What people chose to do with their money is their business.

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