House prices in much of London are very high, making it difficult or impossible for many to become home owners for the first time in the capital.
This is not a new phenomenon. The nearest I could get to London where I worked as a young man was to buy a home in Didcot and get on the train. Then as now central London was expensive.
However, today prices are even higher relatively in central London. There is little property available on the market. The two observations of course are related.
Today more is being built in central London than in the past. There are many new towers of private sector flats rising on the skyline and along the Thames. Many of those are being bought by overseas buyers, who like the idea of a well appointed home in the centre of one of the world’s greatest cities. I have commented before that it is one of our luxury exports, just like the Germans selling the same rich people powerful and expensive cars they do not really need either. The flats do generate jobs and income for Londoners involved in building, maintaining and servicing the properties.
There is another reason why London property is scarce. Few people who currently own a flat or house want to sell. Even if they no longer use the property very much, they hold on. If they think they might like to move to the country beyond the city and get more house for less money, they often hold back.
One of the reasons is tax. The new high levels of Stamp Duty are a consideration for anyone thinking of moving. If someone owns a London flat as a second home, they are unwilling to sell and pay 28% on the gain they will have made. Why not hold on for a bigger gain later? Why not hold in the hope that the government might return to Labour’s lower levels of CGT sometime?
Tax and regulation damage markets. The housing market in London is currently suffering from an acute shortage of supply of second hand properties. Part of the reason is tax based. Stamp Duty is effectively a tax on London. The government could see if it can help. There is also space for more development in London, as more new homes will also assist.