At least estate agents are happy. Image: Getty.
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Two charts that show why London home buyers are totally screwed

Everybody move to Paris.

More hilarious news from the London housing market. In the year to June, the average house price in the city climbed 25.8 per cent. The average price has now breached £400,000 for the first time.

To put that in a context, a healthy mortgage is generally agreed to cover no more than 90 per cent of a property's value, and to represent a maximum of 4.5 times the borrowers' income. So a couple of first-time-buyers hoping to buy an average London home would need a joint income of £78,000, putting them in the richest 4 per cent of households in the country. Oh, and they'll also need £40,000 in the bank.

Should you already own your own home in the city, and are consequently mystified that anyone could consider this a problem – congratulations on successfully having been born at the right time.

All this looks a lot like a bubble – prices are rising at their fastest rate since 1987, and look what happened then – but it's in the nature of bubbles that we can't be certain we're in one until they burst. So in the mean time, here are two charts.

The first one compares price increases in London with those in various other major world cities, over the course of 2013. (They’re a bit out of date because December was the most recent month for which we could find enough figures.) We've compiled it using data from the Bank of International Settlements, and the S&P/Case-Shiller Home Prices Index: the various indexes it's based on work in slightly different ways and cover slightly different things, so we're not claiming the figures are anything more than indicative. Nonetheless, they do give you a sense of the trends in various cities.

London is an outlier – but it's not the only place having a crazy house price boom. Prices have gone nuts in Sydney and Shanghai, too. The difference is, of course, that Australia and China both have much faster growing economies than the UK, much of which still remains in the doldrums.

All that said, it looks like a great time to buy a nice pied-a-terre in Paris, if you've got the cash to hand.

This second chart uses data from government research, asking the public whether they were in favour of building new houses in their area. The polling was conducted in 2011, so it's just possible attitudes have changed in the mean time. Either way, though, it explains rather a lot.

In inner London, where land is scarce and most people rent, everyone wants more housing. But in outer London, where there's more space, and where any major new housing programme is realistically going to have to begin, opposition to house building is stronger than the national average. In fact, people in outer London oppose house building more strongly than people in any other region of England.

So to sum up, we're screwed.

This is a preview of our new sister publication, CityMetric. We'll be launching its website soon - in the meantime, you can follow it on Twitter and Facebook.

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.

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Debunking Boris Johnson's claim that energy bills will be lower if we leave the EU

Why the Brexiteers' energy policy is less power to the people and more electric shock.

Boris Johnson and Michael Gove have promised that they will end VAT on domestic energy bills if the country votes to leave in the EU referendum. This would save Britain £2bn, or "over £60" per household, they claimed in The Sun this morning.

They are right that this is not something that could be done without leaving the Union. But is such a promise responsible? Might Brexit in fact cost us much more in increased energy bills than an end to VAT could ever hope to save? Quite probably.

Let’s do the maths...

In 2014, the latest year for which figures are available, the UK imported 46 per cent of our total energy supply. Over 20 other countries helped us keep our lights on, from Russian coal to Norwegian gas. And according to Energy Secretary Amber Rudd, this trend is only set to continue (regardless of the potential for domestic fracking), thanks to our declining reserves of North Sea gas and oil.


Click to enlarge.

The reliance on imports makes the UK highly vulnerable to fluctuations in the value of the pound: the lower its value, the more we have to pay for anything we import. This is a situation that could spell disaster in the case of a Brexit, with the Treasury estimating that a vote to leave could cause the pound to fall by 12 per cent.

So what does this mean for our energy bills? According to December’s figures from the Office of National Statistics, the average UK household spends £25.80 a week on gas, electricity and other fuels, which adds up to £35.7bn a year across the UK. And if roughly 45 per cent (£16.4bn) of that amount is based on imports, then a devaluation of the pound could cause their cost to rise 12 per cent – to £18.4bn.

This would represent a 5.6 per cent increase in our total spending on domestic energy, bringing the annual cost up to £37.7bn, and resulting in a £75 a year rise per average household. That’s £11 more than the Brexiteers have promised removing VAT would reduce bills by. 

This is a rough estimate – and adjustments would have to be made to account for the varying exchange rates of the countries we trade with, as well as the proportion of the energy imports that are allocated to domestic use – but it makes a start at holding Johnson and Gove’s latest figures to account.

Here are five other ways in which leaving the EU could risk soaring energy prices:

We would have less control over EU energy policy

A new report from Chatham House argues that the deeply integrated nature of the UK’s energy system means that we couldn’t simply switch-off the  relationship with the EU. “It would be neither possible nor desirable to ‘unplug’ the UK from Europe’s energy networks,” they argue. “A degree of continued adherence to EU market, environmental and governance rules would be inevitable.”

Exclusion from Europe’s Internal Energy Market could have a long-term negative impact

Secretary of State for Energy and Climate Change Amber Rudd said that a Brexit was likely to produce an “electric shock” for UK energy customers – with costs spiralling upwards “by at least half a billion pounds a year”. This claim was based on Vivid Economic’s report for the National Grid, which warned that if Britain was excluded from the IEM, the potential impact “could be up to £500m per year by the early 2020s”.

Brexit could make our energy supply less secure

Rudd has also stressed  the risks to energy security that a vote to Leave could entail. In a speech made last Thursday, she pointed her finger particularly in the direction of Vladamir Putin and his ability to bloc gas supplies to the UK: “As a bloc of 500 million people we have the power to force Putin’s hand. We can coordinate our response to a crisis.”

It could also choke investment into British energy infrastructure

£45bn was invested in Britain’s energy system from elsewhere in the EU in 2014. But the German industrial conglomerate Siemens, who makes hundreds of the turbines used the UK’s offshore windfarms, has warned that Brexit “could make the UK a less attractive place to do business”.

Petrol costs would also rise

The AA has warned that leaving the EU could cause petrol prices to rise by as much 19p a litre. That’s an extra £10 every time you fill up the family car. More cautious estimates, such as that from the RAC, still see pump prices rising by £2 per tank.

The EU is an invaluable ally in the fight against Climate Change

At a speech at a solar farm in Lincolnshire last Friday, Jeremy Corbyn argued that the need for co-orinated energy policy is now greater than ever “Climate change is one of the greatest fights of our generation and, at a time when the Government has scrapped funding for green projects, it is vital that we remain in the EU so we can keep accessing valuable funding streams to protect our environment.”

Corbyn’s statement builds upon those made by Green Party MEP, Keith Taylor, whose consultations with research groups have stressed the importance of maintaining the EU’s energy efficiency directive: “Outside the EU, the government’s zeal for deregulation will put a kibosh on the progress made on energy efficiency in Britain.”

India Bourke is the New Statesman's editorial assistant.