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Innovate or Stagnate

4th March 2017

This weekend’s FT House and Homes front page was headlined “How much will $1m buy?”  It claims in Monaco, the world’s most expensive city, this amount will only purchase enough space for a WC.  An exaggeration, as this amount will allow you to purchase 17 square metres.  I know developers who are building liveable self-contained studios within this space.  This is unsurprising as Monaco attracts the uber wealthy, due to there being no income tax, no capital gains tax and no wealth tax.

In London, prices in prime areas have fallen as much as 14% in the last 12 months.  When you factor in the collapse in the pound against the dollar, prime London property prices have fallen as much as 36%.  It’s no wonder agents are reporting increased activity from foreign buyers.  $1m now buys you 30 square metres in the primest parts of London as opposed to 22 square metres last year.

This may prove to be titillating reading, however, the figures and the terrain being described here is outside the reach and comprehension of most readers and indeed most of the population.

The average property price a household in London can afford is £300,000.  This assumption is based on the average household income of £50,000 and a deposit built up for the same amount.

An article on the 16th January this year, in the Evening Standard, talks about the death of the £300,000 home in London.  This figure is significant because it is within the realms of affordability.

The article mentions the decrease in the number of wards where one can purchase a property for £300k.  This has decreased heavily over the last 12 months from 104 right down to 40.  This is causing a flight to areas outside of London which are within commuting times to London.

There has been no solution which is viable to really tackle this situation of affordability within London.  There are only two solutions, one is to introduce policies which will disincentivise foreign and developer investment into property.  This will cool down the market and leave the door open to only end users.  This, however, would serve to harm London on many different levels, and reduce its appeal globally.  The other is to reduce the square footage of new developments, this would in turn reduce the price to within the realms of affordability.

The latter is a more practical solution, a well-designed and multifunctional property is what is required to again revitalise the bottom end of the market which will then trickle upwards.

This is an area which we are focusing on, and we will be kicking off this concept with our development in St John’s Wood.  You can find more on the Code Investing website https://www.codeinvesting.com/investment-opportunity/?cbid=10-Belgrave-Gardens where you can take part in this exciting project for as little as £1,000.

Suresh Vagjiani

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