Home ownership in London 'only for the very wealthy'

The vast majority of would-be buyers have been priced out of the property market

High house prices, strict lending criteria and huge deposits have sent home ownership tumbling in England, according to a study by the National Housing Federation. Across the country, home ownership is expected to fall to 63.8 per cent over the next decade, but federation chief executive David Orr believes the housing market will become particularly tough for buyers in London.

Orr said: “With home ownership in decline, rents rising rapidly and social housing waiting lists at a record high, it’s time to face up to the fact that we have a totally dysfunctional housing market.

“Home ownership is, increasingly, becoming the preserve of the wealthy and, in parts of the country like London, the very wealthy,” he said. “And for the those locked out of the property market the options are becoming increasingly limited as demand sends rents rising sharply and social homes waiting lists remain at record levels.”

“The fact that London wasn’t hit by the potential of a second global recession suggests that people are looking for safe-haven investments”

-Liam Bailey is head of residential research at Knight Frank LLP

The federation forecasts that the majority of people living in London will rent by 2021, with the number of home owners dropping from 51.6 per cent last year to 44 per cent in 10 years’ time. Across England, 63.8 per cent of people are expected to live in owner-occupied homes in 2021, compared to a peak of 72.5 per cent in 2001.

Meanwhile, the prices of luxury homes in London has increased, according to Knight Frank LLP. The value of properties worth an average of £3.7m increased by 10.5 per cent in the 12 months to August, the London-based property broker said.

Knight Frank LLP head of residential research Liam Bailey said the London luxury property market had been unaffected by the turbulence caused by the financial market turmoil and the debt crisis in the US and Europe. He said the pound’s weakness has made London more affordable for overseas buyers.

Bailey said: “The fact that London wasn’t hit by the potential of a second global recession suggests that people are looking for safe-haven investments.

“If they think that gold’s one beneficiary, it looks as if London property is one of the others.”

Luxury property prices will rise by up to 12 per cent this year, according to Knight Frank’s forecasts. Visits to central London properties by prospective buyers increased by 23 per cent in the three months to July, while the number of homes for sale was up by 13 per cent, the broker said.