The London property boom seems to be cursed and praised in equal measure. Some people think that the London property market is a bubble, which will pop in the next year or two and will do terrible damage to the British economy when it does so. They also claim that the high prices are driving ordinary people out of the capital and make it almost impossible for low waged workers to afford to live and especially to buy property in London. This second point is true to a large degree.
The counter to that is that London is one of the greatest cities in the world with a pro-business outlook that means property prices are obviously going to be higher than average. Progress is the go to defence, and the fact that a strong housing market is good for a growing economy in the short and medium term.
One of the biggest problems with the London property market is that it isn’t properly regulated. A recent article in the New Statesman points out the scale of laundered money flowing into the capital’s property market and what it means for property market itself.
‘The amount of money laundered through the UK is estimated to be at 48bn, or two per cent of GDP, while it estimated £120bn worth of UK property is owned by offshore entities and up to 36,000 properties in London exist where offshore havens are used to hide the true buyers’ identities.’
One in ten houses in Westminster is owned in this manner and around one in five properties in the City of London are owned by unknown entities. Regardless of the dirty money that is flowing into the UK by unknown people from unknown places, the practice itself is damaging to the UK property market. It artificially drives up the price of properties in the capital, as higher than average prices are paid for properties as a way of cleaning up money and laundering it for further use. Clean assets eventually lead to clean money.
How does this impact student housing? Simply put, driving up the price of property means developments become more expensive, more risky and therefore less likely. It also drives private, small sized landlords out of the market, as buying houses to convert to student property becomes more expensive than they can realistically afford. As student housing is a particular problem in London, where house prices are rocketing it suggests there is a link.
A better regulated, cleaner London housing market would do wonders for student housing in the capital and beyond. All eyes then on the London Mayoral election…