
London’s Great Exodus - kpozin
http://www.nytimes.com/2013/10/13/opinion/sunday/londons-great-exodus.html?pagewanted=all
======
richliss
To live in Central London without really worrying you have to be in one of two
camps; the rich or the poor.

The rich of course will continue to use their capital to skim the profit and
secure their status, and the poor will continue to vote in councils that
provide social housing and benefits.

I'm one of those who is in the middle and work; I rent in an up-and-coming
area (i.e. people look down on it until they come here) and rent is going up 8
times salary. We are already at rent being 30% of combined salary.

I won't be in a position to get social housing, so I'll be forced to move in a
few months either further out (so travelling will take longer and be more
stressful, and the working day longer) or move somewhere less appealing.

Property in London is controlled by the super rich who realise its easier to
have their current investments increase in value by lack of supply than it is
to fund property development. The shortfall in housing in London will be one
million homes by 2022! The free market is supposed to mean that supply will
rise up to meet demand where possible.

The little property development that does go on is usually done by block
selling hundreds of apartments in new builds off plan to investors from
Asia/Nigeria etc. who in turn get them rented out, or insane apartments that
are sold to Russians and Arabs for £100m+ pulling all other property prices
up.

I think that early stage tech entrepreneurship in London will be a rare thing
unless you can live in your parents house and live like a student in the near
future, or you will end up giving away so much capital just to survive.

The more I read about Berlin the more I see it as being the future of tech in
Europe; creative, cheap property and offices (in comparison), intelligent
people and cosmopolitan.

~~~
cjrp
> I'm one of those who is in the middle and work; I rent in an up-and-coming
> area (i.e. people look down on it until they come here) and rent is going up
> 8 times salary. We are already at rent being 30% of combined salary.

Ditto (Brixton). Flats in my area are already at the £350k (2 bed) mark, with
landlords upping their rent accordingly (having bought the flat for < £200k
9yrs ago). My solution is moving further South (Surrey) near a good train line
which gets you into Victoria/London Bridge in 30 mins. The rent on a
flat/house out there is ~50% of what it is in London, not to mention cheaper
council tax/insurance/etc.

~~~
vidarh
I'm near East Croydon - you can get 2 bed houses in the ~200k range, and 3 bed
houses with a garden in the 250k-300k range, and with rents to match. 15 min
to Victoria 18-20 min to London Bridge, which frankly means that despite being
zone 5 it's still faster to get to the centre than in a lot of places in zone
2/3.

Less desirable areas of Croydon are cheaper (on the opposite end of the
spectrum, you can buy 6-8 bedroom mansions in the 800k-1.5m range, still a
steal compared to central London)

The price pressure is so high in central London because so many people can
afford it, and prefer to pay out ludicrous amounts rather than even consider
moving further out - it's the opposite of the trend cited in the article: The
prices are skyrocketing _not_ because outsiders use it as investments, but
because the demand _make_ the properties a good investment. The outsiders
buying explains the high _purchase prices_ in the centre, the demand explains
the pressure on rental prices.

~~~
CmonDev
I don't want to be mean, but isn't Croydon a generally undesirable area?

~~~
collyw
The whole of London is an undesirable area in my opinion. Expensive, busy,
polluted, full of unfriendly people.

Many people love it however.

~~~
lucaspiller
> The whole of London is an undesirable area in my opinion

Agreed. I think OP was more referring to crime. Ok maybe Chelsea vs Croydon is
a bit different, but compared to any of the surrounding areas e.g. Wimbledon
and Clapham, it isn't much different.

(I was in South Wimbledon - close to Mitcham and Tooting - for 2 years)

~~~
vidarh
You might be surprised. In the year to date, Kensington & Chelsea have had
about 12 crimes per 100 people according to the Met. Croydon have had about 6
crimes per 100 people. K&C does come out better if you look at certain subsets
of serious crime, but Croydon is consistently in the "better half" of London
Boroughs in terms of crime, often doing very well.

Most of the worst boroughs in London in terms of crime are the inner-city
boroughs, regardless of wealth (Westminster in particular is a crime ridden
hellhole if you look at the raw numbers by population, due largely to the
amount of business and nightlife and low number of people living there; but
Croydon city centre suffers from some of the same effect, dragging the overall
crime rate for the borough up, even though the totals for the borough still
remain better than average for London).

~~~
CmonDev
I guess it makes more sense to rob richer people.

------
casca
3 families are leaving London and that makes a trend? Comparing property
prices in London to Williamsburg or SF and it looks like a similar trajectory
to me. Cities are expensive because space is constrained (artificially in many
cases) and lots of people want to live there.

The author makes note of the low "property taxes" in London which is just
spurious. In the US, property taxes are often used as a way to pay for many
local and state government services for a number of historical reasons. This
is often the only income that some states collect. In the UK, council tax is
to pay for a much smaller set of services. A £5m house does not generate 10x
the garbage of a £500k house. It's a cheap shot that tries to make a false
point for US readers.

It's true that the current state of the global economy has meant that fearful
foreigners have brought their money and bought property, but this tends to be
at the very high end of the market which shouldn't be affecting the middle
class that he's referring to. Greater demand by many people wanting to live in
one of the world's great cities might.

~~~
crdoconnor
>Cities are expensive because space is constrained (artificially in many
cases) and lots of people want to live there.

That has ALWAYS been true, so cannot possibly account for today's prices. The
last decade's price increases have been driven by the lack of other perceived
safe haven investments. Treasuries/Gilts pay below inflation now. That money
found a new home: property in tier one global cities.

>The author makes note of the low "property taxes" in London which is just
spurious.

Oh come on. Would high taxes on a house make it a more or less attractive
investment?

>A £5m house does not generate 10x the garbage of a £500k house.

THIS is spurious. Irrespective of whether that's true or not (it's not: a £5m
house probably takes up more valuable land, which is made valuable by
everything surrounding it - transportation, shops, parks, etc.), it still
doesn't change the fact that low taxes make property a much more attractive
investment.

>It's true that the current state of the global economy has meant that fearful
foreigners have brought their money and bought property

It's foreigners who have checked out every other safe investment and seen how
pathetically they pay. Seen the interest rate on Gilts?

Some are also (rightly) fearful of their home governments (Russians, Chinese,
Arabs), and want to park their money in a country where the government is
unlikely to decide to confiscate it one day.

>this tends to be at the very high end of the market which shouldn't be
affecting the middle class that he's referring to.

Except:

A) It does affect the middle classes too. Prices filter down. Everybody who
was buying at the high end of the market and gets priced out buys something
lower down, which prices _them_ out and so on. Land used on expensive
properties is not available for the middle classes.

B) It's not just the very high end of the market. London property is being
shopped all around the world, from Singapore to Hong Kong to the US as a safe
investment for upper middle classes. I could show you a hundred glossy foreign
magazines advertising property which is "close" to some tube station on the
Piccadilly or Northern line 13-15 stops from the center.

~~~
mjn
Copenhagen has traditionally (a bit less recently) fought this kind of effect
by restricting absentee investment ownership through several mechanisms. For
one, a large percentage of property in the city has ownership that requires
residency in Denmark, usually because it's structured as a residents'
cooperative. Another significant portion is owned by nonprofit organizations
that will only rent the property to residents. And beyond that, much rental
property has renter-friendly laws with a view towards ownership, where if you
have been renting the property to someone for three years, you are required to
sell it to them if they want to buy. The general idea is to reduce the impact
of absentee landlords/investors on the local housing market, by trying to
restrict it to only people who physically live in Copenhagen.

The high taxes help make this work as well, by trapping would-be cheats in a
situation where they can't have it both ways. Do they want to claim that they
live in Denmark? Then their property is fine, but they are liable for Danish
income taxes. Do they want to claim that they live elsewhere? Then they avoid
Danish income taxes, but must sell their property.

~~~
roel_v
How is that even legal? It's a direct violation of several European and human
rights laws. Are these laws being challenged in court?

~~~
mjn
Denmark has several EU opt-outs in its accession treaty. Equal treatment of
non-resident non-nationals for the purposes of property ownership is one of
them, mostly because they were worried about Germans buying up all the summer
homes (joining the Euro and joining the European military command are two
others). I believe Malta has the same opt-out, and Finland had a temporary one
that's being phased out.

However the coops are where the residency catch-22 hits most often, and those
are just structured with contract law. They have the typical owner-occupied-
only rules that most coops worldwide have (some NYC coops are similar). When
you buy a coop share you sign a contract agreeing that you, the share owner,
are buying the coop share because you plan to reside there. You agree in the
contract not to sublet it, and to sell your share if in the future you no
longer reside there (usually with a 2-year grace period).

What's different from the U.S. is that it's fairly easy for the coop to
enforce the owner-occupied requirement, because there is a central register of
residence addresses. Every person resident in Denmark declares themselves
legally resident at exactly one address. So the coop can trivially check if
you have declared yourself resident at the coop or not. If you move out of the
country, then to avoid Danish taxes you must declare yourself a nonresident,
which removes you from the register, which the coop then sees. It also means
that you can't own shares in two coops, since you can't register yourself at
both. (Though in either case, some games can be played by spouses.)

The nonprofit housing associations are just regular landlords, who own large
parts of the city and rent out, again with no-subletting contracts.

------
thrill
No one lives in London (San Francisco, New York, Hong Kong, etc.) anymore -
it's too crowded there.

~~~
rquantz
_Because more and more people live in London (San Francisco, New York, Hong
Kong, etc.) now - it 's too crowded there._

Ftfy. How can they be crowded if no one lives there anymore? Or are you
suggesting they're crowded with things other than people?

~~~
joseph_cooney
It's called a joke. There is probably a few TED talks that you can listen to
to explain it.

~~~
levosmetalo
If you need to explain a joke it's a pretty bad joke. Besides, it was maybe
interesting to some people when used first million times, but now, I wish I
could downvote ...

~~~
lotsofcows
That's one possibility...

You just prompted me to upvote.

------
jasonkester
Funny, we saw this exact same article come through a few months back about
Paris.

It's the same story: All the trendy rich people that displaced the poor
bohemians and gentrified the neighborhoods are now being displaced by even
richer people.

It makes for good ironic commentary, so it plays well here. I suspect we'll
see the third part of the trilogy about New York come through by the end of
the year.

~~~
barrkel
The article risks conflating two separate trends.

People with children don't really want their children to grow up on the
streets of London. As the article writer gets older, he'll know more and more
people with children moving out, independent of house prices.

The other bit, the silly prices paid for unoccupied houses, is mostly
concentrated in central London, and a few bits in close proximity to the west,
north and south. There are still plenty of less desirable neighbourhoods.

~~~
mathattack
One could substitute Manhattan too. This seems to be true of many high culture
cities, perhaps as a result of the global investment environment.

------
foobarian
The property taxes cited are fascinating. $3k per year on a 20 million dollar
home??? As they say, there's your problem right there.

I've come to appreciate the extent to which property taxes drive a country's
culture or system of living. I grew up in an eastern European country where
property taxes don't exist, and so there are tons of people who live in quite
posh inherited/grandfathered-from-communist-times residences while receiving
tiny incomes in comparison. Meanwhile the property tax rates common in the
U.S. tend to drive out people who stop being able to afford to live in a
locale.

~~~
objclxt
> _The property taxes cited are fascinating. $3k per year on a 20 million
> dollar home??? As they say, there 's your problem right there._

It's very misleading, or downright wrong. Firstly, you'll pay tax on the sale
(stamp duty), of 7%. There used to be a loophole for corporations, but that's
now been closed (if you buy as a corporation you'll pay 15%). So already
you've paid $1.4 million in tax.

You then pay council tax, which _isn 't_ property tax, but a tax for basic
services such as waste disposal, etc, that your local authority provides.

It normally isn't very helpful to 'pick and choose' taxes when comparing them
to the US, partly because the UK taxes some things very differently. For
example, a sales tax in the US of 20% would be political suicide, but yet
that's effectively what happens in the UK with VAT.

~~~
pja
_Firstly, you 'll pay tax on the sale (stamp duty), of 7%._

On a £20million property? It'll be owned by a shell company in the Vigin
Islands or some other tax haven & only the ownership of the company will ever
change hands so no stamp duty will be due in the UK.

Yes, this is iniquitous. Stamp duty should clearly be replaced by a better
targeted land tax, but good luck getting any UK government to make that
change...

~~~
AmirS2
> It'll be owned by a shell company in the Vigin Islands or some other tax
> haven & only the ownership of the company will ever change hands so no stamp
> duty will be due in the UK.

I believe this isn't true any more. Legally, stamp duty will be due at 15% in
this case.

Of course, whether this is enforceable, whether the authorities make any
effort to enforce this (as opposed to it being a nice sounding law to appease
the public), and whether the people involved actually report these
transactions are entirely different matters, and I wouldn't be optimistic.

~~~
pja
_I believe this isn 't true any more. Legally, stamp duty will be due at 15%
in this case._

Only for newly built properties - the transfer into corporate ownership
attracts 15% duty. However, properties that are already owned by offshore
companies care unaffected.

I agree that there are probably ways round the new rules too: The tax laws in
this country are so complex that those who can employ the best accountants and
lawyers can often simply out argue the Inland Revenue.

------
codex
This kind of housing boom is a direct result of the concentration of wealth in
the top 1%. As wealth concentrates, the things that rich people buy inflate in
price.

~~~
chuable
So you don't think it has anything to do with easy access to credit and loans?

~~~
TruthElixirX
Or building codes restricting things to an arbitrary height, or the fact that
the aristocracy still owns the majority of the land in the U.K[0].

[0][http://www.independent.co.uk/voices/commentators/johann-
hari...](http://www.independent.co.uk/voices/commentators/johann-
hari/britains-land-is-still-owned-by-an-aristocratic-elite--but-it-doesnt-
have-to-be-this-way-483131.html)

~~~
jkldotio
It's probably best not to cite Johann Hari* given there are probably other
sources able to establish the same point.

*[https://en.wikipedia.org/wiki/Johann_Hari#Journalistic_contr...](https://en.wikipedia.org/wiki/Johann_Hari#Journalistic_controversy)

------
aaron695
Lol, it's always funny to see people think the world will collapse when they
leave, because they are the 'real' essence.

And the fact they seem to think they had some sort of right to be there in the
first place having themselves booted out the previous generation.

------
ChuckMcM
Interesting, I strongly suggest that the City change its taxing strategy.
Seriously. If you get proper property taxes and you don't need the services
because the people don't actually live there, then that just accrues to the
benefit of the less well off. It also mitigates the challenge of finding
housing since the taxes will balance out with quality of life improvements.

Its also an exceptionally straight forward way to "tax the rich" as it were.

~~~
Jamiecon
It's a straightforward way to tax people who have homes that are worth a lot
of money. Not entirely the same as being rich.

What if you live in one of the leafier parts of the east end, where only 30
years ago you could buy a house on a blue-collar wage. Now your house is worth
more than £1m. But you're retired and on a basic state pension. You don't want
to move to a cheaper area because your friends and family live close to you
and are able to support you.

High property taxes based on the value of your assets would force you to move
away or re-mortgage. Not ideal when it comes to maintaining a sense of
community or caring for the elderly.

I assume by 'proper' property taxes you mean 'the way the US does things'. I'm
not sure that it would work in the UK with our different economics, system of
government and geography.

~~~
ChuckMcM
So in the article they discussed a special tax break for non-residents which
was resulting in much lower tax revenue from these properties.

As it happens, living in the Bay Area I'm very aware of living in a house
that, I could neither afford to 'buy' again, nor pay the taxes on should my
prop 13 bill revert to 'current value'. But the way the tax base evolves in
California is when property turns over or is sold. So when buy a house the
taxing level is reset to the current value.

My suggestion is that by normalizing the tax burden to new owners without
special "non-resident" perks, you would force the cost of ownership to be the
same for everyone, and that would both discourage some rich folk from moving
(lowering demand a bit and helping) and increase the tax base even though the
number of residents was not increasing (which increases per capita services
budget).

Now the last time I looked at buying a flat in Chelsea part of the thing that
confused the heck out of me was the whole 99 year lease thing. I decided that
real estate in London was going to need a lot more research than I had time
for. A pity though because in 2002 when I was looking at it, I could have made
a nice return.

~~~
Jamiecon
I think that the tax break the article is talking about is the fact that in
the UK, if your 'main residence' is elsewhere, you only pay _income_ tax on
your UK earnings. That's different to the US where (I believe) citizens are
expected to pay tax even if they are non-resident. I'm not sure why it's
mentioned to be honest as income taxes are not related to just buying a house
in the UK - which anyone can do whether they are a citizen, resident, or
whatever.

Council tax in the UK is payable by the building owner or tenant, and is much
lower than, for example, the US property tax. Council tax is supposed to just
pay for municipal services. IIRC, they even break it down into bits on your
bill 'Police - £xx, Fire Brigade - £xx' etc etc

I suppose my points were firstly that it is unreasonable to compare UK council
tax and US property tax, and secondly that a tax directly related to a home's
value can impact people disproportionately due to the crazy rise in UK house
prices over the last few decades.

All that said, the idea of a property tax level resetting when a building is
sold is very interesting - I didn't realise that was the case in California
and it certainly makes sense. However, there is still the issue of our system
of government being different - local governments can't create new taxes (and
it would need to be a local tax since the problem is restricted to one
geographic area), and the economics are different - people just aren't set up
to pay high property taxes. Not insurmountable problems, I accept.

And yeah, 99 year leases are weird, but not uncommon. It gets weirder. For
example it's not that unusual in the UK for properties to be totally
surrounded by land owned by others. Also, land ownership in the UK (London
especially) often has crazy disputes just due to the age of the records.

------
knassy
Olicarchification, the new gentrification, is a bitch. What do all of these
"successful 'creatives' (architects, cinematographers, commercial and
television directors, etc.)" think happened to the people that were living
there before them?

~~~
sliverstorm
What do you mean the new gentrification? Creatives have always been a step in
the march of gentrification, roughly approximated as "poor => creatives =>
wealthy"

~~~
knassy
That's exactly my point. The 'successful creatives' referred to don't sound
like struggling artists and bohemians.

It's interesting that the author doesn't acknowledge where they sit in this
process.

------
walshemj
The elephant in the room is moving out of London for the schools - less
"ethnic" kids

~~~
kenster07
This "elephant" is a racist opinion of your own making. Parents want to send
their kids to a school where their peers will influence them to be good
students. And as anyone who has gone to a largely "non-ethnic" school can
attest, the racial makeup of the student body is far from a guarantee.

~~~
walshemj
How is it racist to point out that out - what next being called racist for
pointing out that BME people that get stopped and searched more than whites?

The guardians own articles on property make a point of highlighting "good"
schools when they cover an area?

Parents good intentions can often go out of the window when it comes to their
children - I recall my mum commenting that if we had stayed in Birmingham she
woudl have tried to get me into King Edward VII via family connections.

King Edward VII being the top selective school in the UK

------
kingrolo
A great thing about moving to the suburbs (from Zone 2 to Zone 5) which I
didn't consider before, was that now in the morning I always get a seat on the
train, so I can immediately get my laptop out, and the journey disappears.
Definitely worth the extra 7 minutes train journey for me.

------
gotofritz
A lot of people move out of London when they have children. Inner city
schoolkids are scary, many don't want their children growing up being mixed up
with gangs. I know I didn't.

------
Theodores
The problems of the London (and UK) property market go back to the days of
Margaret Thatcher. Selling council homes, abolishing rates and low interest
rates and deposit requirements have stacked the cards in favour of the few.
Effectively we are borrowing from the grandchildren with the property bubble.

The property bubble received a boost with the dot com crash as it was the only
outlet for speculative capital. There have been some dips, however, house
price inflation is never seen for what it is - inflation. In fact it is kept
out of the headline inflation figure. You can have housing go up 10% a year
and inflation be at 2% - notionally. When 25-33% of people's income is spent
on housing you would expect that if that cost goes up 10% then the overall
inflation would go up by at least 2.5% even if everything else, e.g. food and
fuel was static.

In the UK we need to look at what our European neighbours do and borrow a few
ideas from here and there. For instance in Switzerland foreign nationals need
to live there for five years to buy a house and even then they have to
actually live in it rather than rent it out. They also have a sizeable tax on
owning a property equivalent to its rental value. Consequently the house price
inflation in Switzerland is practically non existent and most Swiss people
rent. They live like kings compared to most Londoners and don't have a bee in
their bonnet about having to be 'on the housing ladder'.

In a world where not everyone has a roof over their head, homes should be
homes rather than speculative investments for the work shy. Something has gone
wrong with capitalism if it makes more sense to invest in property than to
invest in the bank (low risk) or the stock market (some risk).

~~~
VLM
"Something has gone wrong with capitalism if it makes more sense to invest in
property than to invest in the bank (low risk) or the stock market (some
risk)."

This macroeconomic observation is probably the most important observation in
the whole discussion. When the best thing a people can do with $1M is very
expensively (high transactional costs) trade non-productive real estate with
each other, that implies an economic collapse in the future, or at least an
anticipated one.

In a part of the world with (rightly?) more optimism, $1M would be dropped on
something productive. Small business. Going in as part of a medium business.
Stock in large businesses. Bonds in huge businesses. Productive assets of some
sort not a depreciating liability like property.

Now what happens to prices when that collapse occurs, and what is the
demographic characteristics of the bagholders being set up to be holding the
asset when it's price collapses?

------
tehwalrus
the tax figures quoted are nonsense. They are for council tax - paying to have
your bins collected, and in London only the subsidy for the tube and busses -
not all the taxes you have to pay for living in the UK.

If you rent the property, your rent income would be subject to income tax
which is a % of the income (depends on the total income, but for large enough
values will be 40%.)

Additionally, when you buy or sell a house, you must pay "stamp duty", which
is a percentage of the sale value, and for a £30m house would be 7%, or £2.1m
[1].

[1] [https://www.gov.uk/stamp-duty-land-tax-rates](https://www.gov.uk/stamp-
duty-land-tax-rates)

~~~
walshemj
Actually a lot of the more expensive property is owned via trusts which avoids
stamp duty.

And if you are renting out you set up a company to do this and pay your self
mostly via dividends

~~~
tehwalrus
Alas, I'm sure there are ways around it. This is mostly why I'd classify any
time money went from a "company" into a personal bank account as "income" and
tax _all_ that at one rate - dividends, salary, rent, all one income. The one
thing I'd allow to be exempt would be pensions contributions - which you will
pay tax on later when you draw them out again anyway.

I wish politicians could see past all the separate groups of voters they can
bribe with exceptions and tax credits and just implement something simple and
cheap to administer - more money for public services, less faff.

~~~
walshemj
To simplistic it doesn't reward investment risk in companies over safer
investments in say government gilts.

~~~
tehwalrus
If markets work, you don't need to incentivise - Risky investments pay out
more when they do succeed.

If markets don't work yet, fix the failures with regulation until they do. No
need to incentivise behaviour through taxation.

edit: my principal reason for believing it's better to do things this way
round is cost: re-writing the rules only costs you (us, the government) money
once, and it works forever. Writing an exception in costs you money once to
write the exception, plus every year in lost revenue.

TL;DR - laws = code, exceptions = CPU-hours.

~~~
walshemj
Oh dear yet another junior coder blindly trying to apply simplistic solutions
from his experience in coding to the real world.

Answer this do you really think that investing in government bonds (say 3%
consols) should be taxed the same as taking a risk in a start up?

NO because no one would invest in any company of the economy woudl stagnate.

~~~
tehwalrus
Actually I was trying to use a coding analogy to explain to a technical
audience. I apologise, should all future contributions be in the form of a
mathematical proof? perhaps latin?

Seriously, you have no idea what an economy would do given different changes,
as no one has tested it - we don't have any good[1] evidence for anything at
all in the sphere of economics, except perhaps that people don't behave as
economists model them.

As I said in my previous answer, different levels of risk are given different
levels of reward already; changing the tax level of each won't make any
difference, relatively speaking. (I won't bother explaining how VC funds
spread risk to make it acceptable to lay-investors, because you doubtless
already know.)

If markets are to be trusted for anything, putting correct prices on different
levels of risky investment should be it. If not, as you say, no one would ever
invest, and we would need to ask the government to run all our industries for
us.

[1] from the point of view of physicists who actually _care_ about uncertainty
values.

------
baumgartn3r
1) odd to find this on Hacker news 2) reads like a remix of David Byrne's
recent article in the Guardian about NY [1].

Unfortunately, they both have a point.

[1] [http://www.theguardian.com/commentisfree/2013/oct/07/new-
yor...](http://www.theguardian.com/commentisfree/2013/oct/07/new-
york-1percent-stifles-creative-talent)

------
killermonkeys
I'm about to give up on London and move to San Francisco. Both cities are
experiencing 10%+ house price inflation and all the pain that goes with it.
New York has experienced much the same since the 2008 housing crash. Cities
are in, suburbs are out. So I have trouble buying the hypothesis that London's
increase is due to its use as a quasi-currency or foreign demand. The demand
to live in London and other world cities is common and organic. I don't doubt
the UK's retrogressive tax policies encourage more investment than normal but
that's not the centre of the demand, nor are Eric Schmidt or Michael Bloomberg
legitimately competing with me for housing.

~~~
codex
Cities have been "in" since the industrial revolution. What's different this
time?

~~~
bodyfour
Look back 30-40 years: * Places like the Lower East Side of Manhattan were
magnets for broke artists because they were dirt cheap places to live. * San
Francisco neighborhoods like SOMA were similarly inexpensive. A few people
with meager incomes could go in together and rent a warehouse to live in. *
London had numerous squats: housing stock so unvalued that it wasn't worth
stopping people just moving in for free. Think about property values in those
places today.

In the past 60 years we've witnessed a remarkable cycle. First you had the
"white flight" to the suburbs starting in the late 1950s or so. By 1980 the
general consensus seemed to be that central cities were doomed forever to
poverty. Now the trend is reversed and people want to pour back in. However,
the regional population is much larger than when this cycle started so central
housing has become a scarce resource.

The article is mostly about forces particular to the London market though. It
is amazing how high property values have gone there. I live in San Francisco
so I think I'm fairly accustomed to high prices, but visiting London and
seeing mews houses going for £3m still blew my mind. Another peculiarity of
the UK market is that a lot of property trading are just leaseholds, so you
don't even really own the house after you "buy" it. (There are "freeholds" for
sale as well, but that's even more expensive) Lovely city, but it does make
you poor.

------
guard-of-terra
Moscow realty is Russia's reserve currency for ten years now, what's so
surprising with London?

"They accept that their children will never be able to afford to stay on in
the city." The reality of new middle ages when who you are is defined by what
you inherited, not by your skills.

~~~
eli_gottlieb
So you're just going to let the Western world move into a "new Middle Ages",
then?

------
ballard
I've lived in Shepherd's Bush and to the south by train. The commute from the
'burbs is grueling, but the cost differential is hard to ignore. (Hotels in
London are naked extortion.)

The palpable sentiment is the average person is walking a razor-thin financial
tightrope.

------
robmcm
One soultion would be to have a tax on empty properties, and tax rental income
in bands simular to tax duty. This would then make property a worse
investment, and increase the supply for people buying.

Obviously you would want this to come in slowly so it doesn't cause a crash.

I guess government isn't around long enough to do this, and no one wants a
crash on their watch, so are happy to let it continue.

------
csomar
Sorry, the Stats tell you otherwise: [http://www.london.gov.uk/shaping-
london/london-plan/facts/](http://www.london.gov.uk/shaping-london/london-
plan/facts/)

London is adding more people. It's just the OP and his friends who left.

------
fpp
A bit more background on the numbers mentioned in the article and some
personal thoughts:

\- Non-mortgage sales of houses/flats in the highest price areas in central
London (e.g. SW1 / SW3, SWxx plus parts of inner, East and North London) are
now more than 80% (that is most likely the cash figures referred to) - people
/ non-first time buyers are shelling out funds here of almost always more than
£1M for small flats - houses from £2M - both up to £30M and more)

\- The total number of property sales is about 50%-60% of the volume of
pre-2008/9 sales.

Given the broad scale of house prices in London (e.g. £1M - £30M+) and similar
high prices in some of the fringe areas (where top price areas also command
house prices > £20M), IMHO this only means that there is massive (almost tax-
free) inflation-hedging for many that are profiting from the gains of the
financial markets in the last years / decades - in other words £1M is the new
£100K from e.g 20 years ago.

While the times might have passed when buyers showed up with bags full of cash
and could legally buy real estate in the UK / London - no questions asked
rendering all global money laundering regulations nil and driving property
prices up to previously unseen levels (the commonly used cliché would be a
Russian "business-man", but same applies to anywhere where people got hold of
truckloads of cash from whatever sources), the UK/London is still a tax heaven
for many, particularly European buyers (e.g. Germans because of loopholes in
tax legislations / double taxation laws can reduce their taxes massively some
close to zero).

Besides the above I believe the following key drivers are visible:

\- Central locations in mega-cities like London are getting more and more
expensive by the sheer demand (more people than 20 years ago, globalisation)
and limited supply.

\- Since years in the UK, many, that have made huge profits in financial
markets, have exchanged those into tangible assets like property - another
indicator for that would be land / country estates with large amounts of land
all selling at multiples of years ago. This is not the first time this has
happened, in centuries before whole areas in London were built by financial
investors / people that have profited from massive financial gains e.g. on the
stock exchange. IMHO this also clearly demonstrate that many of those DO very
well know they are trading hot air.

\- Most of the middle-class children/20s today will be substantially poorer
than their parents as they will not be able to participate / gain profits e.g.
in housing, but instead will have to pay substantial amounts of their income
(if not inheriting a property) for living / housing expenses. One more reason
for this is also that huge financial profits today are not shared as broadly
as these were e.g. 10 years ago via bonus pays, salaries.

Generally speaking (all the above epitomized) - if you don't have the money to
live comfortably in London but have to work for it, London becomes less-and-
less attractive now even to middle class people with income levels beyond
£150K p.a. - others in services jobs, nurses, teachers, etc are since years
not able to live in London anymore - add the changes in living subsidies since
April this year when the UK started to "deport" low income families from
London to Manchester, Birmingham, the North, the recent Red Cross figures of
more than 100 Million people in Europe having no money to buy food and you get
a more holistic picture what actually is happening.

------
drpgq
The novel Capital by John Lanchester is a great look at a London street that
was historically lower middle class but over time has become upper class.

------
duiker101
Matt moved from London to Cambridge? Not that the prices here are so much
better.

