It’s become received wisdom that wealthy foreigners are to blame for the unaffordability of homes in London. You know how the story goes: they buy everything in sight, pricing everyone else out; they don’t buy flats because they want to live in them, they “buy to leave” and sell for a vast profit at some future date; to these oligarchs and super-rich such properties aren’t homes, but blocks of bullion or “safe deposit boxes” where they can stash their spare millions and watch them grow.
There’s something a bit too neat about all this. For a start, while money from overseas funds the bulk of new residential properties in “prime” central London and a couple of other expensive spots, only a few percent of homes bought in Greater London as a whole are purchased by foreigners. There’s also something discordant about the stress on the foreignness of those “rich foreign investors” whom 49% of Londoners deemed the biggest reason for the capital’s soaring house prices when polled last April. Would rich investors in London be alright if they weren’t foreign? Are foreign investors alright if they live in London, as many do? Are we not a “world city”, suddenly?
On Wednesday, the London Assembly’s housing committee explored the foreign investor theme with the help of guests, who included Peter Wynne Rees. Until a year ago, when he entered academia at UCL, Rees was the City’s transformative planning officer. If you don’t like the Gherkin and all that, blame him. He lives on the 27th floor of The Heron - the first large residential building put up in the City since the Barbican - and has been trying to get a residents’ association going. He has discovered that many of the tower’s residents exist more in theory than in practice: “25% of the owners haven’t collected their keys even after 12 months. A lot of the other flats are lived in by student offspring, even more are visited for a few weeks a year. Russians who buy flats in London tend to use them for vacations and leave them empty for the rest of the time.”
Rees, as he reminded everyone, coined the “safe deposit box” metaphor. He described the main thrust of the Nine Elms/Battersea regeneration as off-plan selling in the Far East, with buyers picking out non-existent properties on the strength of CGIs showing views of London landmarks they recognise. Yet he made plain he’s not opposed to overseas investment per se - after all the Square Mile skyline across the Thames from City Hall that he helped to create was funded in that way.
The thing about those offices, he said, is that they’re fully occupied. By contrast, too many of the high-rise residential buildings going up in the centre are not. This was a poor use of precious land. All that footloose big loot from China, Singapore, Malaysia, Russia and Greece needs to be channeled into things London requires, socially and economically: “We need to be building more homes that are actually utilised, and more offices. We need a professional private rented sector.” Rees cited lifeless prestige enclaves like Chelsea Harbour as examples of what we’re getting instead, and blamed a loss of belief in the power of planning: “It seems to have gone out of fashion”. In the Guardian, Rees has accused the government of destroying the tools of the planning trade.
Other guests painted a less alarming “buy to leave” picture. Katy Warrick and Jim Ward from Savills and Ian Fletcher from the British Property Federation said research indicated that the vast majority of overseas investors wanted to rent out the properties they’d bought. Unlike in the Heron, only a small percentage were kept as holiday homes or student pads for children and very few indeed were simply left, as it were, unwrapped. But all agreed that solid data on all this was hard to find, as was defining what makes an investment foreign. Boris Johnson boasts of his “concordat” with developers to market in the UK first. Warrick said this had had an effect, but that it didn’t follow that a UK-based sale is made by a British person.
The standard defence of the status quo is Johnson’s “something-or-nothing” argument. Criticised for the low yield of “affordable” homes extracted from developers of some of London’s largest pieces of available land, he argues that without upfront investment from overseas, none of these regeneration projects would get off the ground and therefore no “affordable” would be generated on those sites all. The problem, though, is that he’s a soft touch. His successor must be both tougher on preventing prime site developments that do London little good and more determined to find ways to make up for any resulting loss of little of value to the city that they do produce . We have too much need and little space for so much waste.
The housing committee meeting took place on March 4, 2015. Watch the webcast via here.