One of the great populist cries in London in recent years has been against the influence of wealthy foreigners on the price of housing. Every few months there’s been a new expose of the torrent of hot money sunk into the capital’s property market by filthy rich overseas investors seeking safe financial havens, often in the form of decadent flats in glistening towers that have yet to even be built and are far beyond the financial reach of ordinary Londoners.
As such, the global super rich are commonly blamed both for the “pricing out” of would-be first time buyers and the “social cleansing” of the poor. The plunge in the pound’s value following the Brexit vote might give fresh impetus to the phenomenon Londoners across the political spectrum love to blame for the average price of a home in the capital rising to half a million quid and beyond.
But have these alien billionaires, typically characterised as picking out job lots of Thames-side penthouses on the strength of cheesy CGIs displayed in hotel suites in Hong Kong and paying for them by way of shadowy offshore trusts, really been the biggest culprits?
The evidence for this appears, at best, ambiguous. An analysis of London’s housing market produced last November by GLA Economics, part of the London’s mayor’s in-house wonk department, stressed the shortage of solid data on the subject. Such stats as are available tend to come from estate agents operating in the capital’s “prime” locations. It’s pointed out that areas defined as “prime” tend to change over time and that it isn’t wholly clear what types of property buyer really count as foreign.
Recent research by Savills suggested that the proportion of sales of “prime” site property – mostly in central London and Canary Wharf – bought by “international” buyers rose from 23% in 2005 to 40% in 2014. But “prime” areas only account for about 8% of London’s private housing stock and the Bank of England has estimated that “foreign inflow” property transactions represent only around 3% of the London total. There may be some inflationary ripple effect into surrounding areas, but this is contested. In the context of Greater London as a whole, “prime” is a niche market.
GLA Economics also say that the term “international” in surveys could include UK ex-patriates and Londoners who happen to have overseas origins, as well as speculators born and based in far-off lands with footloose fortunes on their hands. They note that the increase in international sales is “broadly in line with census data on London’s changing proportion of foreign-born population” and that the longer people born overseas have lived in London, the more likely they are to be owner-occupiers. In other words, foreign migrants who settle in London for the long term – and maybe become British – often end up buying somewhere to live here.
This brings us to the emotive matter of so-called “buy-to-leave” and that part of the housing crisis narrative which declaims against dwellings acquired to serve as “safe deposit boxes” or “gold bricks” that gain value for their owners simply by existing and are never actually lived in by anyone.
This seems to be far less widespread than is often casually claimed (not least by politicians). Surveys indicate that the great majority of such units are, logically enough, let to private renters and that much of the rest are bought by parents for use by their children who come to London to study. Only a small minority seem to be second homes left empty most of the time and the number of these in London has been in decline according to government figures, now amounting to just 1.4% of the capital’s total housing stock.
So if Londoners can’t logically blame rich foreigners for the high price of London homes, where should they look instead? The answers, boringly, lie in complicated stuff to do with political will, pooling resources and expertise and changing planning policy with a view to increasing overall housing supply to meet demand and improving affordability. We’ll get back to those another day. Or days.
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