The rise and fall of housing price is always a concerning topic for all. London has become the most expensive city to live and work as its rising housing price exceeds that of Hong Kong.
In the article two possible solutions are listed.
The increase of housing price makes people in London less capable of undertaking the cost of their mortgage or rent, and even less capable of purchasing a property in the city. As a result, many are considering moving out of London. The lost of working population would disturb the regular economic patterns in the city. Therefore, some firms work with local banks and try to offer their employees better mortgage services. I agree with this solution but it can only work as a temporary one. The reason is once too much capital concentrates in one single area, housing in this case, the economy structure can easily collapse if there is any significant changes in that area.
On the other hand, the London First survey indicates that more houses need to be built in order to solve the renting and buying difficulties. But, I do not think that this is a possible solution. Since the housing price is increasing so fast that it exceeds the speed of increase of the entire economy, the price of certain commodities would rise as well. Once the price of commodities such as metal and cement increase, the cost of construction rises. This will then creates a possible increase in housing price, which is not wanted in the current situation.
In my opinion, the government should intervene the housing market to solve the problem. First of all, it needs to control and lower the housing price. The government can set standard price ranges for different sizes of properties to ensure the capital invested in the housing market does not break the economic balance between different markets. Making the increase rate of housing price parallel to that of the entire market can assist in economic growth. Another thing the government needs to do is to control the factors that stimulate housing price growth. Immigration is one of these factors. Government can limit the number of investment immigrants and let more skilled immigrants in the country. Skilled immigrants will not cause as much housing price increase as investment immigrants do. Setting rules for immigrated population to put limited capital on real estate market can help slowing down the growth rate.
After all, the above opinions are only based on the current status of the housing market, and since the market is so unpredictable, they might not apply in the future. However, testing some possible solutions is the most efficient way to solve the problem.
Article link : http://dealbook.nytimes.com/2014/09/26/businesses-raise-alarms-about-londons-high-cost-of-housing/?_php=true&_type=blogs&_php=true&_type=blogs&ref=international&_r=1