Earlier this week, London knocked Hong Kong out of first place as the most expensive city in the world to live and work, according to Savills, a British real estate agency.
A few days later, KPMG, the consulting and accounting firm, announced that it would help its young employees buy houses, offering them private banking services including preferential mortgage rates with two local banks, Clydesdale and Yorkshire.
And on Friday, London First, a business lobbying group, and Turner and Townsend, a global construction consultancy, released the results of surveys they conducted asking businesses, employees and local government officials about the impact of London's meteoric rise in housing costs.
The news was not good.
Three-quarters of the businesses surveyed warned that London's housing supply and costs are "a significant risk to the capital's economic growth" while more than half of employees said they find it difficult to pay rent or mortgage costs and work in London.
"Clearly there is a problem with affordability in London," said Simon Collins, KPMG's chief in Britain. "People are worried that they will be forced into renting forever."
Savills estimates that property prices have jumped 18.4 per cent in the last year in the capital. As a result, talking about housing in London is a lot like talking about housing in New York City: It is an obsessive topic that never seems to bore even though the conversation is roughly always the same (unless, of course, you happen to be a Russian or Chinese oligarch and money is no object). Prices are stratospheric, they appear to be rising fast and getting onto the property ladder is increasingly difficult for professionals not employed at successful hedge funds or private equity firms.
But now the issue is moving from breakfast tables and policy debates into boardrooms, where businesses are expressing concern that London is becoming unaffordable, even with significant commutes, for the talent pool they need to tap.
| HOUSING WORRIES |
London has knocked Hong Kong out of the first place as the most expensive city in the world to live and work, according to Savills, a British real estate agency. Here are some reasons for the jump in housing prices and how it is impacting people:
|
The London First report said that the high costs of both renting and buying are being driven by a major under-supply of housing. The city is growing by 100,000 people a year but the number of homes being built is less than half what is needed.
"London's chronic housing shortage is already making it difficult for many of those with the talents the capital needs to live and work here, and this problem is only going to get worse unless we start building more homes," said Jo Valentine, chief executive of London First, which represents business interests.
According to the London First survey, conducted by YouGov, a British polling firm, more than a third of businesses say they are concerned about the impact that London's housing supply and costs is having on their ability to recruit and retain staff.
Employees are no happier. When asked how likely they were to move if housing prices continued to rise, almost half said it was likely that they would consider moving out of London.
Not surprisingly, those ages 25 to 39 were hit the hardest: more than two-thirds said the cost of their rent or mortgage made it difficult to work in London.
George Osborne, the chancellor of the Exchequer, has said that the housing shortage is causing too many people to take on too much debt, and posing perhaps the greatest threat to the country's strong economic recovery.
In April, the Financial Conduct Authority introduced tougher mortgage standards, called the Mortgage Market Review, requiring mortgage lenders to more stringently assess the ability of potential borrowers to meet their initial and future mortgage payments.
When the market continued its tear, the Bank of England intervened, putting a cap on lenders. No more than 15 percent of their loan portfolios could consist of mortgages in which borrowers were lent amounts that exceeded 4.5 times their income.
The market has responded. According to the British Bankers Association, mortgage approvals for house purchases eased back to a 12-month low of 41,588 in August, 14.1 percent lower than January's 76-month high of 48,396.
But prices continue to rise. According to the Savills report, called "12 Cities," rising rents and the strong pound pushed up the typical cost for individuals of renting somewhere to live and leasing office space to $120,000 a year (the ranking is based on an index that measures the total costs per employee of renting living and working space on a United States dollar basis in 12 world cities).
That is driving employers to creative ends. Mr. Collins at KPMG said that the private banking services package was part of a broader effort to offer what employees want in the workplace. Other changes include more fixed pay and less bonus so employees would invest in pensions and mortgages.
In addition to redistributing salaries toward fixed pay, similar to what is happening in the city because of the bonus cap rules from Europe, KPMG will focus on helping employees move more fluidly around the world and within the company, and it will give people their birthdays off. It will also help with those pricey mortgages.
"Owning a home is fast becoming a fairy tale for all but society's wealthiest," Mr. Collins told The Financial Times.
©2014 The New York Times News Service
