[pjc50]

Nothing in London is quite so profitable as property development. I suppose this is the continuation of the process of sweeping away the derelict bits of Hackney for the 2012 Olympics.

It would be nice if economic activity wasn't quite so concentrated in unaffordable London. But I can feel the wave of money washing over the built environment even out here in Cambridge ("Silicon Fen"); it's just about commutable to North London, so buildings have been going up with the clear aim of selling to middle eastern or Chinese investors. It has its positive aspects - many of the cleared buildings were in terrible condition, ugly, or (as in Hackney) suffering from asbestos. But the new ones are still unaffordable. I'm fleeing to Edinburgh while watching professional couple friends get priced out of buying their first home.

Property booms cannot go on forever: http://www.theguardian.com/world/2014/feb/28/home-ownership-... but we lack the leadership to resist this or to try and distribute industries more evenly across the country. (Mediacity is a token attempt at building a media cluster in Manchester while kneecapping the BBC and looting its buildings).

[smikhanov]

It's actually interesting to note that office property in SV is anything but cheap and as a construction project (I believe) is just as attractive for developers as a typical derelict block in East London. However, this does not stop SV from being SV.

Let's face it: some of the offices around Old City Roundabout are pretty grim. Bad plumbing, windows overlooking someone's wall or a dumpyard, barely working HVAC, you name it. What is that the startups have to lose? If all those old office blocks will be demolished and will be replaced with a shiny new one, that's fine. Sure, Last.fm will need to move elsewhere and a new tenant in the building most likely will be KPMG, DLA Piper or RBS, but it's not that that hypothetical Last.fm will have nowhere to move. There are still plenty of cheap grim office property around (in Croydon, for example) but the borough only wins from getting rid of the old ones.

All in all, if a London startup ecosystem is here to stay, gentrification is too unimportant of a problem to kill it.

[7952]

Britain does seem to be getting balkanised into areas where economic development is allowed and areas where it is not. The planning system compartmentalises everything so that marginal development is impossible. Places like Silicon Fen are great, but you also need the crappy industrial estate that have cheap rents and access to transport links.

[lmm]

Industry goes where it wants - if we try and stop these companies from basing themselves in London, the competition isn't other parts of the UK, it's Berlin or Singapore or Shanghai. Central planning of industry has a pretty poor history.

[barrkel]

It's less about industry than about foreign investors seeing London property as a store of value. There's a whole class of people living in properties as "guardians" at discounted rent simply to avoid the property seeming abandoned:

http://online.wsj.com/news/articles/SB1000142405270230454950...

[pjc50]

Yes and no; a lot depends on the competence with which it's done. It's not turned out too badly for China or South Korea.

There's a strong case for having a proper property tax (to central govt) in London. If we're going to have a boom then then at least we should benefit from it.

Admittedly there's hardly anyone in Parliament I trust even to be basically competent in this kind of planning, let alone honest.

[neverminder]

I'm in UK and I've been eyeing Berlin for a while now. The rent prices for offices/accommodation seems to be a fraction of those in London. Also startup community in Berlin seems to be booming.

[dia80]

This is only happening through the looking glass of 0.5% rates - 3% on property seems attractive. If the economy ever re-inflates and rates go up a couple of points all this building wont seem so attractive anymore...

[ses]

The lack of a combination of affordable property and decent jobs in areas within a reasonable distance is definitely causing increasing problems in this country, and only worsening social inequality. Remote working is one solution that I think very slowly will become more mainstream. I mean really why do start-ups have to grow in a 'technology hub'? Most small/start-up companies in these areas I know of rarely collaborate or seem to benefit from proximity with each other.

[mattgibson]

"we lack the leadership to resist this"

Many of our 'leadership' (1/3 of MPs in fact: http://pastebin.com/1249K1N4) have large buy to let portfolios and don't give a toss if the economy crumbles if it makes them richer.

[gaius]

What is the value of a building? To me it seems obvious that a building is an asset and what you want from it is the income from the rents, and the value of it is the NPV of future rents. Anything else is bubbly.

[mattgibson]

The source of the value is mostly the land, rather than the building. When prices rise, it's actually the land value rising, but we talk about it like 'house prices' are going up.

Causes a guaranteed bubble as you can't make more land, so price rises are not followed by increased production causing the price to fall again.

[lifeisstillgood]

An excellent point, that is almost universally ignored. NPV of future rents is ignored almost totally in the domestic housing market, and it seems that commercial property is riven with debt fuelled purchases that need another purchase to work.

[arethuza]

"I'm fleeing to Edinburgh"

And Edinburgh isn't exactly cheap.... (compared to London it is though!)