London property should be open for international purchasers but the balance now is wrong
I’ve never been convinced that foreign buyers are the cause of London’s housing woes. London is an international entrepôt attracting the world’s brightest and best. It is a city unashamedly built with capital flows from generations of world trade. We tinker with its free-market heritage at our peril.
Overall, the London property market also remains very British. Even at the top-end buyers with some sort of UK link dominate. For example, convincing 2013 Savills research found that less than half of prime London sales were to international buyers and that international buyers are investing in the capital – 93% had British occupation or business interests.
And yet and yet. There needs to be balance in all matters. Things look different if you specifically examine new-builds. An increasing number of large recent developments have been sold abroad off-plan. One study found that half of 127 apartments in one recently-completed East London development were sold overseas. Around 500 of the 866 flats in phase one of Battersea Power Station were apparently sold in the Far East. British Property Federation research found that over 70% of new-build London sales in developments of more than 20 units and in the £1,000-£1,500 per square foot range were to investors.
Many might say ‘So what’ if the homes are subsequently let out to those less cash-rich than these fortunate foreigners seek a sterling investment. However there are four worrying straws in the wind.
Firstly, are sufficient homes being let? Are too many lying empty? Islington Council’s research found that that was precisely what was happening. As many as a third or more of homes in some new developments were potentially vacant. Of almost 2,000 units built in blocks in the borough since 2008, 30% have no registered voters. The percentage rises considerably when social housing is filtered out. For example, of the 58 private apartments in the 1 Lambs Passage development, 71% had no voter registered, while 65% of the 106 in Worcester Point had no one registered.
Secondly, and crucially, international preferences are starting to dominate physically what we design. Despite the fact that consistent large majorities would rather have more street-based high-density designs we are building ever bigger and higher. In a fascinating recent meeting with an experienced London surveyor, it was startling the degree to which Middle Eastern and Far Eastern high-rise preferences are clearly dominating what developers seek to get consented. But these buildings can’t be made to disappear once the international capital flows that preferred them have dried up or gone home again. And we don’t need them to solve any housing crisis.
Thirdly, have ‘international trade flows’ become something else? Recently the National Crime Agency made the startling claim that ‘foreign criminals are laundering billions of pounds through the purchase of expensive properties, which is pushing up house prices in the UK.’ Its Economic Crime Director told The Times that London prices were being artificially driven up by criminals ‘who want to sequester their assets here in the UK’ and that ‘the London property market has been skewed by laundered money.’ This can’t be right. There is a philosophical, as well as a legal, distinction between permitting international capital flows and attracting dodgy money. We seem to be in danger of being on the wrong side of that divide.
Finally, most believe there is a need for more affordable homes within London if it is to continue to function as a complex community. The massively higher running costs of towers and large building make this much harder not easier on site. As Duncan Bowie, the author of much of the London Plan, put it in May at the launch of Superdensity the Sequel, ‘the report should be re-titled ‘Against Hyperdensity’ … you’re not going to get social housing at hyperdensity and not much at superdensity.’
It is important to emphasise what I am not saying. London’s an international city, made and marked by two thousand years of extra-territorial commerce. It would be historically unnatural and economically foolish to ban foreign investors or purchasers.
But many recent developments being bought by non-UK buyers are actively undermining the very qualities that (most think) make London special. It is worth asking whether the development and planning process should be kowtowing to their preferences rather than protecting the preferred high density street-based urban form of most Londoners. Surely if there’s to be a democratically-controlled planning system it should be mediating between what the ‘pure’ market would build and what most residents want to see. Otherwise, what purpose does it serve?
Nicholas Boys Smith is the Director of Create Streets