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Exodus

13th March 2019

Urbanisation is an increase in population in cities and towns from rural areas.  Urbanisation began during the industrial revolution, when workers moved towards manufacturing hubs in cities to obtain jobs in factories, as agricultural jobs became less common.

Globally, more people live in urban areas than in rural areas, with over half of the world’s population residing in urban areas.  In 1950, 30% of the world’s population was urban, and it is predicted by 2050 two thirds of the world’s population will be urban.

The statistics for urbanisation were very revealing to me.  Looking at North America, with such a large land mass, you could fit over 100 UKs into its size.  Yet it is one of the most urbanised countries in the world; with 82% of its populations living in the cities.

Here, in the UK, it is over 83%, and this has been steadily increasing over the last decade.  The bottom line is, the population tends to gravitate towards cities.  This results in the cities, and their property prices, expanding outwards and upwards, known sometimes as the ripple effect.

We have a major issue.  An affordability one.

Across the UK, rising house prices now stand at an average of 7.6 times the average annual salary, which is more than double the figure for 20 years ago.

This is the average across the UK.  Let me give you an example of the issue in London.  In the borough of Kensington and Chelsea, house prices are typically 40 times greater than earnings.

It’s easy to see how this has happened.  Since 1997 and 2016 property prices have increased by 259%, but earnings have been left abysmally behind at only 68%.

In 1997, house prices were on average about 3.6 times workers’ annual gross earnings.

On one hand we have a trend towards urbanization, on the other we have a fundamental affordability issue.  The Help to Buy scheme has been used by 200,000 applicants to move onto or up the ladder.  But as last week’s article revealed, the real profiters from this scheme have been the developers.

Whilst the affordability issue is not being addressed, humans are adapting.  You can observe pockets of underground economies developing. For example, several years ago, in and around Ealing Road, Wembley, there was a particular type of tenant who would take your property.  He would not negotiate, he would pay the full market rent and take it in almost any condition.  This property would then be sublet to couples who would live four to a room.  In a three-bedroom property this would mean as many as 16 people living there.  The tenants would be provided with a tiffin service.  The cost of this would be £55 to £70 pw.

Flat sharing has now increased.  From 2009 to 2014, sharing apartments has increased by 186% for age group 35-44yrs and 300% for 45-54yrs.

From statistics such as these we can appreciate how urbanization is increasing in spite of the rising property prices in urban locations.

People adapt and comprise. It seems the steady march into the cities is the overriding factor.  This trend looks set to continue.  However, nothing is being done to really tackle this issue head on.

Suresh Vagjiani

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