Tuesday, 17 July 2012

IMF slashes UK growth forecast

The network development "bazooka" is a disgraceful diversion.  The actual increase in spending is a mere £3-4bn.  This sum can easily be raised by taxing by an extra 20% the City bonuses in a bad year.

Housing needs investment.

The current housing deficit, especially in London and South East (which is the engine of the economy) is arresting.  It is so blatant this should be a top social priority for the government, whose swift response would in effect provide the economy with a much needed stimulus.  

Only in 4 years since 2000 was housing repair expenditure smaller than new housing.  Repairs deplorably include "conversions" in which a 2 bedroom normal house is "converted" into a "charming and manicured studio" PLUS a "chic 2 bedroom coquette apartment" to squeeze in as many tenants as possible.  Money put into public housing was traditionally only 10% of the total spent on building new houses over the past decade.  The numbers of households in London increased dramatically This must change dramatically if property is to become affordable and of decent standards.

In London both the population and the household size grew in high teens % since 2001.  Obviously this hasn't happened in Kensington and Chelsea, the average household size is 2.  This means outside the posh codes, more people live in more but smaller homes, because not a single decent building is added to a creaking, environmentally disastrous, old socks smelling stock.

The need for a change in the system is exemplified below.  The rents appropriated in this dysfunctional market are dizzying.

The average building cost per sqm in the UK is somewhere at £1,500 (was in 2010 according to http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-232068).  This is quite high given the hourly cost of skilled labour is only £14.  It is either the British builders move REALLY slowly, or there are massive inefficiencies in the process.  Even so, the cost of building does not explain the cost of purchase.  The property prices per sqm in France, Spain, Holland or Finland are 30-50% lower than in the UK, particularly in London.  

If it costs less than £2 grand to build and it sells for £10 grand, where is the difference going?  Is the profit justified by the incremental value added by the land owners and intermediaries, or is this an imperfect market that needs government intervention?


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