Real estate property prices in London are astonishing. This is not an atypical “listing” in the centrally located district of Marylebone.
The cost of this flat is 975,000 pounds. At our current rate of approximately $1.50 USD to each GBP, that comes out to about $1,500,000.
The flat is 620 square feet. Let’s repeat that again – 620 square feet. It is possible that there are upscale dorm rooms in the US larger than this for affluent college kids. That works out to about $2400 a square foot.
You also don’t “own” the land underneath your flat. In this area of town the Portman Estate owns land and there are other companies, as well. You buy a “lease” and as your lease gets closer to its termination date the cost to “renew” the lease goes up substantially. “Ground rent” is a pittance (a few hundred dollars a year) but the renewal of the lease can be very costly especially as it nears its term. I am far from an expert and picked up my information from online sources and brief conversations but this article in the Telegraph has additional data if you’d like to research further. On top of the costs to extend the lease which can be as high as $100,000 dollars there are fees for surveyors and others just as in the US when you need to employ various professionals for your mortgage financing.
There are other places in the world where the cost per square foot is $3000 or more – but these are generally penthouses or high profile properties, not a small flat in a great neighborhood in London with likely not much of a view at all. This sort of price, however, is not out of the norm in this neighborhood.
Who can pay these sorts of prices? For the most part, foreigners can. According to this article 60% of the buyers of real estate in central London were from overseas. They were driven by the lower value of the pound (which makes their currency go further), the favorable tax regime, and the security and stability of living in London (compared to their often dodgy governments).
For UK citizens paying tax rates in the 50%+ range (as opposed to wealthy foreigners who pay little as a percent of their income), you would need to make an astonishingly high amount of earnings to pay for a high quality residence in an exclusive part of London. Remember that not only are real estate costs high, personal taxes are high, and everything you buy from cars to furnishings to services such as a nanny are sky-high, as well. I had a discussion where a friend mentioned someone who had to make 2 million pounds / year in order to live at what he considered to be an acceptable level in this part of town.
Cross posted at LITGM
Paris is similar although the French President is doing what he can to bring real estate prices down. :)
When Mitterand began his term with strong socialist policies, French real estate was suddenly a bargain although I doubt Paris was much affected.
I make a point to check the real estate listing when I have traveled overseas and have always found this to be true. Fascinating to see the cost of housing. The closest I have found was a small country cottage (@1,000 sq ft) in Ireland for three times the comparable home in the US.
Most people don’t have mobile incomes. Their incomes are tied to a particular place. Living in a neighborhood in London isn’t an option.
I don’t have any friends with an income of two million pounds per year.
The disconnect between London housing and local incomes is profound. However, the very rich / elite need to live somewhere and a lot of them choose London (and Singapore) for their access to all that they need – banking, limited tax rates, discretion, and a set of services from nannies to jets for their needs. That’s why 60% of the sales are to foreigners…
1) I like to say that living in London is OK for the helicoptering classes.
2) How do they afford housing? The Bank of Mum and Dad.
3) If I had an entirely free choice of where to live in Britain I wouldn’t choose London, I’d go for Edinburgh or Oxford.
A friend of mine, who is about to operate on my eyes in two weeks, told me that he had a flat in London about 25 years ago and, after the property prices went way up, he sold it. He said the profit on the sale was more than his practice income for the year, which is a lot.
We are again seeing price escalation here in the SF Bay Area and for the same reason – a safe harbor for foreign money. Go to an open house and most prospects are foreigners. Often it is older people buying a house for their kids to go to school or get a foothold job.
That puts prices well above local incomes, even here in Silicon Valley. But workers need housing and local housing costs drive up salaries and wages and hence drive off business – a vicious spiral.
When I was in school in the UK (late 90s), I lived in the Marleybone area. It was apparent then that the neighborhoods were changing from locals to foreigners. In this case it seemed to be the wealthy offspring of the oil shiekdoms who were buying up the property – decent job offers didn’t cover much more than rent. Then you could go over by Edgeware road to see how the underclass had set up the kabob stands, etc…
Haven’t been back since and have heard I wouldn’t recognize it.