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Cost - when I worked in Central London I could not afford to buy a former council flat (Red Lion Square) near work, My Boss , a Director and My Bosses Boss the

Cost - when I worked in Central London I could not afford to buy a former council flat (Red Lion Square) near work, My Boss , a Director and My Bosses Boss the MD could not afford it either

sprafa 7y ago
London has hugely inflated house prices, particularly in Central but now all over the city due to foreign investment. It's obvious - virtually no one who actually lives in the city can afford it anymore.
- user5994461 7y ago
  Not entirely true. The various CXO, MD, expensive contractors and middle managers in large companies can afford in some parts of the city. They could afford almost everywhere a couple years ago. There is a lot of money in London, people just can't fathom how much. An income of £100k a year only gets you around the top 10% of workers. Needless to say. The closest you get to the center, the more you are competing against the very top percentile, which is filthy rich.
  - sprafa 7y ago
    Sure that’s relatively true but it makes no sense for 90% of new housing to be built for those 10% of individuals (and I think it’s less than 10%). What makes more sense is that direct foreign investment has spiralled prices up because it allows the 10% richest of any country to buy london property (whether they live there or not). I mean I’ve seen ads for London property in Honk Kong and I’ve heard reports of a Russian buying up entire towers in the Battersea development (from a contractor there). I think the idea that current housing is completely unaffordable to the median wage (around 30k) to be incomprehensible unless you account for huge amounts of foreign investment. Sure there’s lot of wealth in London there’s always been. From memory the multiplier between wage-to-house-price went up like 10x in the last couple of decades (let’s say something like from 9x annual salary to 90x) I don’t understand how that could happen without foreign money. People can’t build unaffordable housing to the local population unless they are not catering to the local population.
jfoster 7y ago
But then that just means the area isn't high density enough, right? High density means greater supply. As supply increases, you would expect that the cost of a flat will decrease, except if value had been created by increasing the density. I think value will be created by increasing the density initially; consider the extreme case of city property value versus country-side property value. That can only keep happening up to a certain point, of course. It seems most places haven't found that ceiling yet. As you mentioned, high density to you implies high cost. That's because the density isn't yet high enough.
- bluGill 7y ago
  Not exactly. A manufactured Single family house (ie trailer house) is about the cheapest building you can make for a family. However the construction doesn't scale at all: it isn't strong enough to go up and for fire reasons there needs to be a gap between units. The next level of construction (which can still be manufactured but needs more onsite setup so traditional on site is competitive) costs more to build, and it scales somewhat linearly to about 5 floors. Then you get a price jump. In short, the highest density cannot be as cheap as the mid density because the rent you need to justify that level of building must be higher than the middle levels. On the other hand, 5 floors is much larger than most areas have. There is plenty of room to grow denser without crossing that limit. There are also sticky factors. It costs a lot of money to build something. If you already have a building your rent needs to be high to justify tearing down a perfectly good building and building larger. It is possible for rent to be increasing fast in a neighborhood with only a few more people who want to live there than there are units. So you risk building bigger only to discover you can't rent all your new apartments and rent drops for everybody as supply now exceeds demand.
  - mywittyname 7y ago
    This is the reason affordable housing needs to be built 40 years ago. If a large apartment building was built in 1979 with a target rent price of $500/mo, that would have been considered a high-end development. Today, that building could (not necessarily will) provide low-income housing. As it would be paid off and $500/mo per unit could probably still provide enough money for maintenance and upkeep.

Cost - when I worked in Central London I could not afford to buy a former council flat (Red Lion Square) near work, My Boss , a Director and My Bosses Boss the MD could not afford it either

sprafa 7y ago

London has hugely inflated house prices, particularly in Central but now all over the city due to foreign investment. It's obvious - virtually no one who actually lives in the city can afford it anymore.

user5994461 7y ago
Not entirely true. The various CXO, MD, expensive contractors and middle managers in large companies can afford in some parts of the city. They could afford almost everywhere a couple years ago. There is a lot of money in London, people just can't fathom how much. An income of £100k a year only gets you around the top 10% of workers. Needless to say. The closest you get to the center, the more you are competing against the very top percentile, which is filthy rich.
- sprafa 7y ago
  Sure that’s relatively true but it makes no sense for 90% of new housing to be built for those 10% of individuals (and I think it’s less than 10%). What makes more sense is that direct foreign investment has spiralled prices up because it allows the 10% richest of any country to buy london property (whether they live there or not). I mean I’ve seen ads for London property in Honk Kong and I’ve heard reports of a Russian buying up entire towers in the Battersea development (from a contractor there). I think the idea that current housing is completely unaffordable to the median wage (around 30k) to be incomprehensible unless you account for huge amounts of foreign investment. Sure there’s lot of wealth in London there’s always been. From memory the multiplier between wage-to-house-price went up like 10x in the last couple of decades (let’s say something like from 9x annual salary to 90x) I don’t understand how that could happen without foreign money. People can’t build unaffordable housing to the local population unless they are not catering to the local population.

jfoster 7y ago

But then that just means the area isn't high density enough, right? High density means greater supply. As supply increases, you would expect that the cost of a flat will decrease, except if value had been created by increasing the density. I think value will be created by increasing the density initially; consider the extreme case of city property value versus country-side property value. That can only keep happening up to a certain point, of course. It seems most places haven't found that ceiling yet. As you mentioned, high density to you implies high cost. That's because the density isn't yet high enough.

bluGill 7y ago
Not exactly. A manufactured Single family house (ie trailer house) is about the cheapest building you can make for a family. However the construction doesn't scale at all: it isn't strong enough to go up and for fire reasons there needs to be a gap between units. The next level of construction (which can still be manufactured but needs more onsite setup so traditional on site is competitive) costs more to build, and it scales somewhat linearly to about 5 floors. Then you get a price jump. In short, the highest density cannot be as cheap as the mid density because the rent you need to justify that level of building must be higher than the middle levels. On the other hand, 5 floors is much larger than most areas have. There is plenty of room to grow denser without crossing that limit. There are also sticky factors. It costs a lot of money to build something. If you already have a building your rent needs to be high to justify tearing down a perfectly good building and building larger. It is possible for rent to be increasing fast in a neighborhood with only a few more people who want to live there than there are units. So you risk building bigger only to discover you can't rent all your new apartments and rent drops for everybody as supply now exceeds demand.
- mywittyname 7y ago
  This is the reason affordable housing needs to be built 40 years ago. If a large apartment building was built in 1979 with a target rent price of $500/mo, that would have been considered a high-end development. Today, that building could (not necessarily will) provide low-income housing. As it would be paid off and $500/mo per unit could probably still provide enough money for maintenance and upkeep.