In fairness, comparing the property prices in a fashionable London district with those in a lower income country in deep economic trouble after its property bubble burst (and Ryanair's loss-leader headline fares) isn't the best illustration of how expensive London is.
I mean, you can match those Barcelona prices in nice market towns a short train ride from central London (probably a similar door to door time to many parts of central London to commuting from West Hampstead), which many London workers actually do. They can think about buying in those areas from £75k as well.
But the investment bubble at the high end of the property market is a largely separate phenomenon; middle-class renters are more likely to take advantage of cheap rents from a lazy letting agent managing the investment property of a foreign owner who's not too savvy about what their buy-to-let income should be than they are to be affected by the unoccupied flats in Belgravia not being on the market. For that reason, for £28000 a year I got five large bedrooms, two reception rooms and a garden in a desirable south London suburb three years ago, so I'd expect a pretty impressive[ly located] 2 bed flat for £25000....
> with those in a lower income country in deep economic trouble
Things might be a bit more subtle than that; Barcelona is in catalunya, which is actually doing quite well for itself in spite of the catastrophe in the balance of Spain.
The region of Catalonia has a budget deficit that runs above Spain's average and is also the region with the largest debt outstanding, twice as large as the region behind. From reading the FT, Catalonia is in big trouble, and they had to introduce a tax that taxes bank deposits i.e. double taxing your income. I don't think they are in a very good shape.
I think that's a bit of a stretch, Catalunya is by itself in a huge problems (debt) and is also still a part of Spain, so you can't that simply separate it from the problems of the country.
It's true that Barcelona by itself is probably still doing pretty fine - but I would say that's for different reasons - there's no shortage of people from all over the world coming there to live/work/study, be it Erasmus students or business people (a lot of Germans my experience is telling). That keeps the renting market busy.
On the other hand, 680€ for a three-bed flat in Les Corts? That's insanely cheap, so either the OP found a great opportunity or the prices really dropped down in a last year (or, third possibility: I overvalue the attractiveness of Les Corts)
Of course imagine if Spain still had it's own currency. It would be in the tank making the cost differential significantly more dramatic. Thus attracting more people and more real estate purchases helping to re-start the economy etc.
£25k/yr is ~£480/wk - student accommodation at Imperial College (this is South Kensington) goes up to ~£250/wk for a living room and bedroom.
Taking a cursory look at the (current) prices in the area, Chelsea and similar areas look like you might find a single place or perhaps two at those prices, but it won't be terribly appealing - attempting to actually rent for £480/wk looks like it gets you a studio/1bed flat.
Edit: So essentially, £25k/yr will get you almost nothing in upscale areas, a hell of a lot in downscale areas.
Using Chelsea as a reference point for London prices is akin to using Rolls Royce as a reference point for car prices. Yes, you have to pay more to show off if the BMW isn't upscale enough for you.
There's plenty of choice of central locations with good housing, transport, reputations and nightlife where £25k per annum gets you a very nice flat indeed.
OTOH it is also somewhat fair to say that trying to stay close to upscale areas whilst not being in them can in quite some number of cases place you in slightly risky areas to live.
Isn't there a thing in London about people subletting every part of their property to bus loads of migrant workers?
3 bedroom place then becomes a 6 rent unit property off the books. That would explain part of the rocketing prices. I've known chinese nationals who stayed 15 to a london property. All cash. Authorities do nothing and some are in on the shuffle taking kickbacks.
>> 2. How does overfilling properties lead to rising prices? If anything, it would serve to keep prices lower.
When one family rents a 2 bedroom flat, they may be able to afford say 1K (husband and wife working). But when the same flat is rented to 4 singles, they might be able to afford 2000. Each person's share is just 500. So when the landlord asks them 1200, they would happily pay for it as the effective rent per person is only 300.
What you are saying is that the primary driver of price is ability to pay. This is basically a claim that the market isn't competitive at all. That's a fairly strong thing to say, as even a vastly under-supplied market can be competitive.
"Willingness to pay" is different from "ability to pay" -- your willingness to pay will be greatly affected by the price of competitors or neighboring markets, for example.
Right, if there's no competitors or neighbouring markets, then you have a monopoly situation, and the sole seller (or cartel) are free to set prices as high as people are able to pay. But just because there is a shortage doesn't mean there's a monopoly.
This overfilling is pretty widespread across most nationalities just getting by in London, if you go by anecdotal evidence.
A friend of mine lives somewhere in North London (I believe it is Golders Green), paying 1300pounds a month for 2 and half room apartment, paying council tax and so on, all on a minimum wage as a porter which is around 1200 pounds a month(why he prefers being a porter over a Perl programmer that is one of his skills is another question).
If he were not subletting the room and half, there would be no way he would be able to work in London for a minimum wage. The situation is similar to most people working for minimum wage that he knows.
Still, I think this overfilling is a symptom not the cause of high property prices. This overfilling by the poor has always happened in big cities.
I mean, you can match those Barcelona prices in nice market towns a short train ride from central London (probably a similar door to door time to many parts of central London to commuting from West Hampstead), which many London workers actually do. They can think about buying in those areas from £75k as well.
But the investment bubble at the high end of the property market is a largely separate phenomenon; middle-class renters are more likely to take advantage of cheap rents from a lazy letting agent managing the investment property of a foreign owner who's not too savvy about what their buy-to-let income should be than they are to be affected by the unoccupied flats in Belgravia not being on the market. For that reason, for £28000 a year I got five large bedrooms, two reception rooms and a garden in a desirable south London suburb three years ago, so I'd expect a pretty impressive[ly located] 2 bed flat for £25000....