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London needs one million homes over next decade, report says

[LONDON] Soaring demand means London and its surrounding counties will need at least one million new homes in the next 10 years to meet demand and prevent values and rentals from spiraling higher, the Adam Smith Institute research group said in a report on Friday.

Building on less than 4 per cent of the city's Green Belt, the spaces around the city where development is limited, would provide the homes needed, the report said. Almost all of the homes could be provided within 800 meters of a commuter train station, it said.

London is at risk of a housing bubble as real estate begins to look overvalued after house prices surged 40 per cent from the beginning of 2013, UBS Group AG said in October. A rising population is also pushing up rents, which averaged 1,544 pounds (US$2,250) a month in November, more than double the amount charged in the rest of the UK, according to Homelet, the UK's largest reference-checking and rentals insurance company.

"The increasing demand for housing is putting pressure on our cities, the growth and prosperity which is strangled by urban containment policies that were introduced nearly 70 years ago," Tom Papworth wrote in the report. "Green belts also have significant negative effects in human welfare, pushing up accommodation costs, reducing private space, increasing house price volatility and increasing the cost of business."

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The Greater London Authority wants to double house building in the UK capital to 42,000 homes a year, the most since the 1930s, because the city's population is expected to rise to 9 million by 2020 from 8.4 million in 2013. Developers completed just 21,350 new homes in year to September, according to UK government data.

The Adam Smith Institute is an independent think tank that promotes free markets and libertarian ideas.