The average cost of a home in London is on course to breach the £1m level by 2030 as house building struggles to keep pace with a rapidly rising population, a leading consultancy is predicting.
Oxford Economics warned that affordability problems in the capital would intensify even further if the expected increase in demand for housing coincided with a widening of the gap between rich and poor.
In a report for a consortium of private sector clients, the consultancy said the forecasts for population and jobs growth made by Boris Johnson were too cautious.
The London mayor predicted last year that by 2036, London’s population will have increased from 8.5 million today to 10 million. Oxford Economics said it was likely to be 11 million.
On jobs, the consultancy said the mayor’s forecasts had not taken into account the 625,000 increase in employment between 2012 and 2014. It also expects employment growth over the next two decades to be 314,000 higher.
Richard Holt, head of global cities research at Oxford Economics, said: “We expect that at some point in the next year the Mayor’s advisers will revise upwards their forecasts for London’s population and employment. Getting these numbers right is vital if London is to have the schools, the transport infrastructure and the housing that it needs, to support its growth.”
The gap between London and the rest of the UK has become more marked in recent years, with an expanding economy in the capital attracting job seekers from the rest of the UK and from abroad.
Oxford Economics said that even using cautious assumptions – earnings growing only slightly faster in London than nationally, and London prices keeping pace with earnings rather than racing ahead – average house prices in London were likely to double in the next 15 years.
“If that happens alongside an increasing divergence between those with high and low incomes, then it will mean affordability problems for people on low incomes.”
The report said much would depend on the rate of housebuilding. “However, the Mayor of London’s plan assumes lower growth in population and employment than our own projections.”
New technology, such as artificial intelligence posed a threat to jobs, including some in the City, Oxford Economics said. “In high-end financial services we think the scope for this is particularly large, with obvious important implications for London. However, we do also see resultant and off-setting employment gains in other sectors and occupations.”
This article was written by Larry Elliott Economics editor, for theguardian.com on Thursday 14th May 2015 17.47 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010