Croydon’s going through a boom time. Hadn’t you noticed?
While the number of people having to work on low-rates, no guarantees, no-rights Zero Hours contracts is reported to have risen by 19 per cent in the past year – making 744,000 people working under such conditions, according to the Office of National Statistics; handy to get them all off the unemployment statistics, eh? – the property market in this south London borough is heating up to boiling point.
House prices in Croydon rose more quickly than all but four other London boroughs in the past year. Property prices in Croydon rose 12.7 per cent in the last 12 months, according to today’s Evening Boris, with the average property price in Croydon now £339,830.
Which means that for a young couple looking to buy, they will need at least £34,000 in savings, just for the deposit…
Property price increases are the last refuge of the scoundrel politician, something that they can point at when all else in the economy is looking increasingly flaky, in the knowledge that those fortunate enough to already have a roof over their head will be smug and calculating their good fortune.
And sod those who are not property owners, including the generations of young people who have no hope of ever amassing the sort of deposit to be able to afford even one of rabbit hutch-sized one-bed apartments in one of the borough’s office-to-residential speculative developments.
How the developers and buy-to-let “investors” in Croydon must have rubbed their hands with glee when they saw the property newsletter from international news agency Bloomberg before the Bank Holiday.
“The fastest-rising neighbourhood in London’s property market isn’t posh Knightsbridge or hip Shoreditch, it’s Thornton Heath, an unglamorous suburb of commuter-town Croydon that’s almost nine miles from Buckingham Palace,” advised Bloomberg, an American-based financial news agency (which explains the fascination with an area’s distance from Buck House).
“While central London growth slows, values are jumping in some of the city’s cheapest neighbourhoods as investors bid for homes they plan to lease. Prices in Thornton Heath, whose high street is peppered with halal butchers, corner stores and kebab joints…”, just a hint of an agenda there, perhaps? Why no mention of the charity shops and plethora of bookmakers? “… climbed 14.7 per cent in the 12 months through June, the most of any area in the city and suburbs included in Greater London, according to property researcher Hometrack.”
Bloomberg quotes Derrick Drummond, a sales and lettings manager of a Thornton Heath estate agents. What Drummond has to say ought to send a chill down all Croydon residents’ spines, and should provide particularly grim reading for Gavin Barwell, Tony Newman and all other paid-up members of the Croydon Glee Club: “It’s more investors looking to buy to rent than people actually wanting to live there.
“Foreign investors are now coming to areas that you wouldn’t have expected to get gentrified,” Drummond told Bloomberg.
It is a compliment so back-handed that it really needs to be printed in three-foot-high letters on vast billboards positioned right outside the council offices at Fisher’s Folly, and opposite the constituency offices of Croydon MPs Gavin Barwell, Steve Reed OBE and Chris Philp.
Bloomberg reports that rents in London reached a record last month and that the Bank of England is concerned that buy-to-let investors may be inflating a housing bubble.
This is an assessment which is fully deserving of a special NSS*, since this has been the case in London for the last 20 years, and has nothing to do with providing homes, and everything to do with providing juicy profits for those with the means to “speculate” on property prices.
House prices in London and the south-east barely paused for breath when the rest of the world gasped at the global financial meltdown. Now, they are kicking on once again.
According to the Bloomberg newsletter, rental yields in Thornton Heath are about 5.2 per cent for a two-bedroom apartment, which is more than double the rental yields provided by properties in what it calls “central London’s best areas”.
“Some of the lowest-value markets in London are the ones now seeing the fastest house-price inflation,” said Richard Donnell, the research director at Hometrack. “As an investor, you’ve got to find above-average yields, which typically means you move towards markets with lower capital values.”
According to the Bank of England, loans given for rental homes made up almost 20 per cent of all new mortgages in the first quarter of 2015. In the early part of this century, around 4 per cent of mortgages were for buy-to-let. The Bank also noted a steep increase in the amount of re-mortgaging activity – people borrowing against the value of their existing property, often to purchase more property for “investment” purposes.
It is 35 years since the Thatcher Government introduced the extremely popular Right-to-Buy policy, which has screwed the housing market ever since because, as well as subsidising the sell-off of public property, the Tory scheme also prevented local authorities using the receipts from council house sales to build new homes.
Demand for housing has been out-stripping supply ever since, including during the 13 years of Blairite Labour government. And an imbalance of demand over supply drives prices ever-upwards.
So you now have a situation where people who own their own homes are borrowing more money, in order to buy second or third homes, the value of which continue to appreciate, and meanwhile they rent out these homes, for rapidly increasing amounts, to people who can’t afford to buy homes of their own because so much housing stock has been bought by property investors. And with rents so high, many of the tenants of these property investors are having to claim housing benefit to be able to afford to live in the area…
So if there is a housing bubble, then it is a publicly subsidised one. And so any supposed “gentrification” or property value growth going on in Croydon right now is unlikely to be a “Good Thing”, but merely a symptom of a dysfunctional market and the greed of landlords, speculators and property developers.
“The only way you’re going to slow down a demand market for rental property is to either build a lot more social housing or build a lot more affordable housing,” Andy Golding, the CEO of OneSavings Bank, told Bloomberg, thus winning the second NSS* of this article.
[*NSS = No Shit Sherlock]
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