Immigration is good for your house price
As I write, rain is pounding my roof and windows so hard that some of it has managed to trickle into the room. Moments ago I was in the Tube, stuffed up against someone else’s armpit with the train stuck for almost 20 minutes. Later, I’ll be going for a night out which will cost me far beyond what I’d pay in almost any other major city in the world.
I love London, I love Britain, but on days like this, I understand why almost 200,000 Britons left the UK, perhaps permanently, last year, whether off to the Costa del Sol or Florida or even further afield.
It is not just because of our high prices, or poor transport infrastructure or failing schools. Britons are lucky to be perhaps the most eminently exportable nationality out there. Our country may have a massive trade deficit but when it comes to valuable human capital, we are world leaders. According to World Bank research, we have the biggest brain drain in the Western world, exporting more graduates and postgraduates per capita than any other leading economy.
What has this got to do with the housing market? Everything. The two main dynamics which shape the property market are supply and demand. The two main reasons prices have soared so high so fast in recent years – aside from very low borrowing rates – have been that not enough new homes are being built, and that hundreds of thousands of immigrants have come to Britain, and need a roof over their heads.
The long-term prospects for your house price depend in large part on people wanting to live in Britain. Meanwhile, the shortfall of new homes being constructed shows little sign of improving for perhaps a decade. According to Stephen Nickell, head of the National Housing and Planning Advice Unit, prices will keep getting more out of reach even if the Government meets its increased targets for housebuilding. And however many houses there are means little if there’s no demand from anyone who wants to live here.
Should the current stream of departing people become a flood, it would, in the longrun, have a negative longterm effect on house prices. So all homeowners have a vested interest in ensuring that Britain remains an attractive place to live.
The migration figures prompt another thought. They indicate that more people are coming here to live for a few years and then departing. Those in this “turnover population” are far more likely to rent than buy. Encouraging, at least, for the buy-to-let market.
edmund.con[email protected]graph.co.uk. Edmund Conway is Economics Editor of The Daily Telegraph