Unaffordable Housing and a Bubble Waiting to Burst…It’s a Tale of Two Cities
The average price of a home in London is now £466,824 and take home pay in the Capital (after tax) currently averages £2,250: so your average Londoner now has to divert no less than 17 years and three months of earned income just to pay off the capital cost of the home that may or may not turn out to be his castle. And when you take interest into account (at a modest notional 2%) the actual final outlay will cost more than £640,000, which will take 23 years and six months to pay off assuming nothing is diverted to fripperies and whims along the way, like food, clothes and heating. UK property prices have crashed twice in the last thirty years: between 1990 and 1992 and in 2007 to 2010: with this level of market disequilibrium, dystopian economics and price inflation how long can it be before the next crash?
Things couldn’t be more different in India, where the Affordable Housing Program is steadily and successfully working to bring homes within the reach of those living on average incomes. Last month for example Lodha Group launched its Crown Housing brand that will make properties available in Mumbai for as little as £28,000, so that families earning just £567 a month will be able to pay off the capital cost of the purchase in just over four years: thirteen years earlier than their London counterparts.
With an appropriate sense of understatement, Lodha’s eponymous Managing Director Abhishek Lodha summed up the overriding mission and commercial dynamic behind the Crown initiative “We believe in the Prime Minister’s vision of ‘Housing for All’, which will help revive the economy and that’s why we have embarked on this round of investment. It is quite amazing that a family which earns just Rs 50,000 per month will be able to own a home”.
Indeed it is…try doing that in Camberwell.
But it’s just one example of the extraordinary resurgence in the subcontinent’s real estate markets over the last decade, fuelled by a burgeoning and increasingly middle class and urbanised population that is now finding home ownership within its grasp.
At the other end of the spectrum, the snappily if utterly forgettably named MMRDA (Mumbai Metropolitan Regional Development Authority to you and me) declared itself in September to be in “total development mode”, inviting tenders for major projects worth £229 Million and targeting foreign investors including Goldman Sachs and AIA Group. And that comes hard on the heels of previous mammoth projects in the City including the Mumbai Trans Harbour Link and a 14 line, 337 kilometre long Metro Network.
Small wonder then that one of Asia’s largest diversified real estate groups, CapitaLand has also now announced its plans to double property investments on the subcontinent from $3.3 Billion to $7 Billion within the next five years.
It really is a Tale of Two Cities.
Modulex Construction is the World’s largest and India’s first Steel Modular Building Company, working to meet the opportunities of India’s real estate markets in a practical and focussed manner. It was established by Red Ribbon to harness the full potential of these fast evolving markets and deliver exciting opportunities for investors: because, when it comes to investing on the subcontinent, nobody knows its markets better than Red Ribbon.
Modulex Construction is the World’s largest and India’s first Steel Modular Building Company, working to meet the opportunities of India’s real estate markets in a practical and focussed manner. It was established by Red Ribbon to harness the full potential of these fast-evolving markets and deliver exciting opportunities for investors: because, when it comes to investing on the subcontinent, nobody knows its markets better than Red Ribbon.
Even on the most superficial analysis, it’s hard to conclude the London property market is anything other than asymmetric at the moment and whether that’s sufficient to precipitate another crash, who knows: I certainly don’t, but I do know instability of this kind is the very last thing investors need during a period of radical political and economic change.
That’s why my primary focus is still very much on Indian real estate markets where not only are the demographic trends supportive of continued market growth but the Government there is also full square behind keeping market momentum going with initiatives such as the Affordable Housing Program.
These are the trends Modulex will continue to build on for the benefit of our investors and I’m proud Red Ribbon is playing a part in the project.