19th March 2019
I came across an article recently, which delves into the issue of rising property prices in Luxembourg. The signs are the same the world over. Luxembourg’s population has increased from 364,000 in 1980 to 600,000 today; and the increase continues at a pace of 2.5% per annum.
The supply of housing stands on average at 2,600 units per annum. Last year being an exceptional year, at 4,800 planning permissions. However, this does not mean there will be 4,800 properties constructed. For one reason or another planning permissions do not necessarily translate on ground level.
An increase in population, along with supply which is far below the demand, leads to only one thing, an increase in property prices.
Prices have been increasing at 4.7% a year since 2010. There was a sharp increase last year at 7% with flats increasing a massive 10%.
Property prices in the capital are on par with some of London’s premier post codes.
Something which is often over looked is the car parking, which rarely keeps pace with this type of phenomenon. Currently, spaces are being sold for €170,000-€180,000.
These are all symptoms of what we call urbanisation, which basically means when the population migrates from the rural areas for life in the cities.
Most of the buildings in Luxembourg are only 3-4 stories, in order to preserve the character of the country.
However, in order for this problem to be alleviated the government will need to do something. The obvious solutions they are considering are to release land which is not ‘zoned’ for house building, or higher density housing.
The former may simply multiply the problem over a wider area.
London is a city which is ahead of this curve by several decades. If we look at the average property price in say Kilburn, which let’s face it, is not a desirable area, the average price for a flat is £540,493 (last year). This probably equates to £1,000 per sq. ft. This is similar to prices in town. Therefore, perhaps releasing more land may simply expand the issue to a wider area, rather than address the issue head on.
In effect the two solutions suggested by the government amount to the same thing. One is to stretch property upwards which is called higher density. The other is to expand outwards, by releasing more land.
Both could be seen as merely inflating the problem to a wider area upwards and outwards. Not actually solving the underlying issue, which is keeping housing affordable, so it serves the many and not the few.
The article demonstrates that wherever you go in the world, governments and cities are struggling with the effects of urbanisation.
The UK government have tried to address this problem, using Help to Buy and through various other planning instruments. But as we have already examined, the Help to Buy scheme seems to benefit the developers more than the struggling first-time buyers.
This is a major problem which is not being solved in an effective manner.
Though prices in central London are floating at around £1,000 per sq. ft, we are doing deals at about 25-30% below this level. This means you come into the deal with effectively a ‘Brexit Buffer’. Do get in touch for more information on how we can work with you.