Gentrification is a familiar story in the capital – but now even the 1% are being squeezed out. What do the stories of Peckham, Holland Park and Chelsea tell us about the new reality?

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Earlier this month the Financial Times ran an article, as every newspaper has done many times before, headlined “Has London’s property price bubble burst?” The report was well researched and judicious, as you would expect. The conclusion, roughly, was “Probably not, but you never know”, which is all one can ever say safely. The only problem was the word “bubble”.

The South Sea Bubble, the all-time benchmark for market irrationality, lasted one year – 1720 – when shares in the South Sea Company rose tenfold and then collapsed. The London property market has been rising, with brief interruptions, since the end of the second world war, when top-end houses cost around £5,000.

In the past 20 years, an era of low general inflation, the Halifax house price index shows that values in London have multiplied by almost six. The Office for National Statistics figures, which started later but dig deeper, suggest that in some of the richest areas of inner London, the 20-year increase is tenfold. Over 70 years, that £5,000 house might have gone up to £5m or £10m – one or two thousand-fold. This long ago ceased to be a bubble. A hot-air balloon? A barrage balloon? The metaphor doesn’t work.

It has become an entirely different phenomenon: a ceaselessly rising tide, occasionally drawing back after one wave breaks, but only to regather force for the next, even stronger, surge. This tide has not lifted all boats, but it has lifted a great many: metropolitan middle-class members of the baby-boom generation in particular, but others too. (Some have of course been drowned, but there you go.)

It has sent ripples across the country, and down the class hierarchy. The Thatcherite council house sell-off created many more winners, particularly in London, and a new cockney diaspora cashed up and moved out, creating space – albeit nowhere near enough – for vast numbers of new Londoners: the hopeful young pouring in from across the UK and the world.

Facebook Twitter Pinterest A basement conversion underway in Holland Park, west London. Photograph: Linda Nylind/The Guardian

The outlines of this phenomenon have become so familiar that only rarely does anyone stand back and consider quite how astonishing it all is, and the extent to which the consequences have permeated every aspect of British life.

Three years ago, the London-based American journalist Michael Goldfarb did stand back, for an op-ed column in the New York Times, which went viral, pointing out something that had not then been widely understood: how the most expensive London homes had ceased to be places to live and had become a store of global money. “Almost nothing has changed,” says Goldfarb now, “except that all the stresses in the system have got deeper. It will take an epochal catastrophe – like the great depression followed by a war – to allow ordinary people to get into the housing market. But no one will say this. It will be a London without Londoners.

“The one thing that has changed is that people will now rent rather than buy. But has there been anything done to protect tenants? Nothing. None of that conversation is being had, and it’s shocking.”

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In fact, the Halifax house price index, which began 33 years ago, shows just how much deeper those stresses have become. From a base of 100 in 1983, the UK-wide index passed the 700 mark earlier this year. The separate Greater London index was still below 200 in 1996, towards the end of the negative-equity crisis, and under 700 in early 2013, but reached 1,128 in the second quarter this year. The average property sold in London fetched £40,000 in 1983; the figure is now £449,000. (The next set of figures may show a slight post-Brexit dip, but only a slight one.)

The structural facts have not changed. Supply and demand for homes in London are out of kilter because Britain is so over-centralised, and the road to success in almost every field of endeavour leads through the capital; because the UK is run by people who have made massive tax-free gains from the boom and have a mindset that the merest blip is a catastrophe; and because successive governments have had no coherent policy on anything relevant – certainly not on housing, regional policy or immigration.

There are also strange sub-phenomena now taking place, designed to keep the mad times rolling. Parents are sinking their profits back into the market to help their children into the game. Well-off baby-boomer provincials are downsizing and moving to London to be near their children. Old houses that were subdivided into flats decades ago are now being undivided again, further reducing the stock of homes.

Facebook Twitter Pinterest A sign announcing the opening of a new branch of Foxtons estate agents on Rye Lane in Peckham. Photograph: Linda Nylind/The Guardian

At street level, it is possible to see other subtle developments taking place – none of them intended, some of them astonishing. Each district, each sub-district, or even each street, has its own nuances and variations. It cannot just be said that the top 1% are gaining at the expense of the 99%, which was never the whole truth. Now the 1% are themselves finding themselves overmatched by the 0.1% or the 0.01% or the 0.001%.

Take Chelsea, an area that has been in fashion, with artistic tendencies, since at least Victorian times. In this portion of London, the wealth has now entirely submerged the raffishness and even the trendiness. “You won’t find any Sloane Rangers anywhere near Sloane Square,” reflected Michael Stephen, the former MP who is now chairman of the Chelsea Society’s planning committee. “They can’t afford to live there.”

Fewer and fewer people are doing anything as quaint as actually living in Chelsea. The signs are obvious from the streets: constant darkness at dusk and closed blinds at noon are the outward indicators of an empty flat, ownership likely foreign and opaque. And there is anecdotal evidence that this is starting to make local businesses unviable.

Close to Chelsea Green is the Sutton Estate, a not unhandsome collection of 15 Edwardian red-brick blocks – originally 500 flats in all – now in urgent need of an upgrade. Affinity, the housing association that owns the estate, plans to knock down all but two of the blocks and rebuild: the result will be 316 flats at “social” rent (much cheaper than the misleadingly titled “affordable” rent), to be funded by building 106 for private sale.

The Chelsea Society has been closely involved, and is sympathetic to Affinity’s problems. “They can choose to spend their money anywhere in the country. And they can build four social housing units somewhere else for the price of one in Chelsea,” says Stephen. Nonetheless, the quantity of social housing in central London will decrease even if the quality improves.

Facebook Twitter Pinterest ‘I don’t think there are any kids here now’ … Cobbler Matthew Childs, who works in Chelsea, but lives in Surrey. Photograph: Linda Nylind/The Guardian

Round the corner is the Chelsea Green Shoe Repairs, run by Matthew Childs, a bubbly bloke who still serves the kind of Chelsea resident who buys shoes classy enough to be worth repairing. Now 51, he grew up in the Sutton, amid the small patches of asphalt and the “No ball games” signs. “There were 50 or 100 of us kids there then, and we always used to play there anyway,” he says. “You don’t need those signs now. I don’t think there are any kids in there at all.” Childs himself now lives in Surrey, and commutes.

The going market rate in the area seems to be around £1m per bedroom, judging by the window of John D Wood estate agents, although – good news – they do have a handsome five-bedroom stone house on offer at £214,000. Bad news: it’s in Normandy.

The redevelopment of the Sutton – a project that will take years to complete – will have one thing in common with the developments favoured by the mega-rich: it will be ghastly for the neighbours. This is something equally apparent at the other end of the Royal Borough of Kensington and Chelsea, on the north side of Holland Park Avenue, in the Norland conservation area.

Holland Park was once far from posh, but in the 1950s these Victorian homes were colonised by the kind of artistic types who went to Chelsea a century earlier. They were then replaced by barristers, doctors and managers at levels that would never be able to fund a house there now.

There are fewer empty homes here, but some residents wish there were. Many newcomers’ first act is to apply to start digging towards the earth’s core to create new basements. The council clamped down on the most egregious “iceberg” basements in 2014, but the issue has not gone away. “You can’t actually prove that these basements cause flooding or subsidence,” says Libby Kinmonth, chairman of the Norland Conservation Society. “But you can prove social disruption. No one can argue against the fact that the neighbours get two years of hell while the work’s going on.”

Facebook Twitter Pinterest The former Crown pub in Holland Park, now closed, like so many in the area. Photograph: Linda Nylind/The Guardian

Kinmonth took me to her local, the Academy, but not inside. The Wellington Pub Co, ultimately owned by the property-developing Reuben brothers, closed it a few weeks ago. The Academy (formerly the Crown) had gone gastro and wine bar-ish long ago, but, she insisted, it was still very much a local. “This is where the pensioners had their lunch, where the bridge club met, and we had our Christmas party and our local meetings … ”

Not least, meetings to protest against pub closures. The Norland Arms is now an estate agents; the Portland Arms is a beauty salon; the Prince of Wales, the Unicorn, the Star and the Earl of Zetland are all private houses. The only pub left inside the conservation area is the Stewart Arms, which, counter-intuitively, is the traditional council-estate pub, with big-screen TV and music on Saturdays.

Opposite the Academy is a row of what were once, quite obviously, neighbourhood shops. Only one is still functioning: a dry cleaners, a business that has not yet transferred to the internet. But it is not technology that has killed these shops; it is house prices. How can you run a newsagents if closing it makes the building worth £2m?

“We were one of the first areas to have a neighbourhood plan,” says Kinmonth, “and the whole idea was to keep the feel of the place. If you look at a meadow, it has amazing biodiversity. We had that here and we’re losing it.”

Variations on the theme are happening across London. Even a decade ago, transport zones 1 and 2 were full of areas whose very name would make one’s mother faint. (“You’re going to live in Hoxton?!”) Now the respectability-map is being infilled. One of the last remaining pieces of the jigsaw is Peckham, best known to the outside world as the home of Del Boy.

In 1966, the architectural critic Ian Nairn delighted in the “unquenchable vitality” of Rye Lane, the shopping street outside Peckham Rye station, “one of the last cockney streets in London”. The cockney flavour has gone, to be replaced by Khan’s emporium and a choice of jerk chicken bars, but the vitality is indeed unquenched. “It’s rough, but I’ve never felt unsafe in Peckham in my life,” says photographer John Whitfield, who has lived here for decades.

But nearby, the first whiffs of coffee can be sensed round the station. The next phase is on its way. Whitfield took me into a narrow alley leading to the huge Bussey Building, a former sporting goods factory. When dereliction came, the shell became a hangout for prostitutes and drug addicts, then home to a dozen or more African churches. Now it is an informal arts centre, with a rooftop cinema and bar, 60-odd studios for the kind of artists who would once have gravitated to Chelsea or Holland Park, and loads of “professional co-working spaces” where wannabe creatives and techies can ply their trade sociably.

“It all seems wonderful,” I remark to a manager, who is disinclined to give his name, but happy to extol the glittering future that awaits Peckham. “But if Peckham comes up as you say, this won’t be an arts centre for long. It’ll be worth too much for housing, won’t it?” He raises his eyebrows a little and smiles an enigmatic smile. But less cryptic answers are available. Not far away, a sign announces the impending arrival of the famously aggressive chain of estate agents, Foxtons.