2013-11-13 05:56:43
rlp
THE most recent census of Britain, in 2011, found few places that were less
populous than they had been in 2001. Most of the shrinking districts were in
the post-industrial north of England. But an unexpected addition to the list
was Kensington and Chelsea, London s wealthiest borough, where the population
shrank slightly. There, houses are kept empty by rich foreigners who buy them
as investments or as occasional summer homes.
That, and the broader surge of foreign money into London housing, irks many.
Simon Hughes, a Liberal Democrat MP, argues that foreigners are pricing British
people out of owning homes. Ed Balls, the shadow chancellor, complains about
foreign investors buying multimillion-pound houses in London and not paying
tax. The government is considering introducing capital-gains tax on foreigners
selling investment properties. Like owner-occupiers, but unlike Britons who own
more than one home, they are currently exempt.
Foreign money is certainly inflating the price of London housing. Data from
Savills, a big estate agent, shows that 38% of homes in central London were
sold to foreigners last year (see chart). In Kensington and Chelsea, house
prices are 37% higher than they were in 2008; in Westminster, they are 34%
higher. In London s most expensive districts, Russians and Arabs seem to be
competing to pay the highest price for properties they rarely use. By contrast,
in outer-London boroughs such as Bexley and Enfield, where few foreigners buy,
prices have fallen as locals struggle to obtain mortgages.
But another common charge, that rich foreigners are denuding central London of
people, is unfair. Beyond the poshest streets in Knightsbridge and Mayfair,
most foreign investors either live in London or intend to rent their properties
out, says Adam Challis of Jones Lang LaSalle, a property consultancy. Hong Kong
Chinese and Singaporeans usually buy London flats to provide a retirement
income, he says. Some are drawn to London by its universities around 33% of
newly built properties bought by foreigners are intended for student children
to use, according to Knight Frank, another estate agent. Others value Britain s
light property-tax regime: council tax does not rise much with the price of
homes. For Asian investors, the fall in the value of sterling since 2007 makes
London housing seem cheap.
Foreign competition may well price some British people out of buying flats to
live in. But British buy-to-let investors who can often obtain cheaper
mortgages than first-time buyers are a bigger cause of falling home-ownership
rates. And without foreign money, many flats might not have been built in the
first place. Unlike British buyers, foreign buy-to-let landlords tend to prefer
newly constructed properties: around 73% of new central London flats are sold
abroad. Crucially, they are willing to buy flats off-plan , years before they
are even put up.
When recession hit in 2008, bank finance to build new flats all but dried up,
says Katy Warrick of Savills. But in London off-plan sales to foreigners helped
to finance many projects, reducing the need to borrow scarce capital. In
London, housebuilding overall fell by just 20% between 2008 and 2012 and in
some inner-London boroughs it increased. In Manchester, where the population is
growing just as quickly, the slowdown in construction was much more severe.
New housebuilding ensures that private rents in London are lower than they
otherwise would be. It also adds to the stock of social housing, points out
Christine Whitehead of the London School of Economics: developers usually have
to agree to build some new flats for below-market rents. And as well as
increasing its size, foreign investors are improving the quality of the rented
sector.
Asian investors tend to like blocks of high-rise flats with features such as
communal gardens, roof terraces and underground car parks. They are careful,
poring over floor plans and measuring closets; sometimes they insist on
American-style services such as concierges and laundry. In neighbourhoods such
as Bow, near Canary Wharf, such flats draw income-rich, asset-poor young
professionals, helping to gentrify places that were once poor.
As the housing market recovers, British investors are increasingly copying
foreigners: flats at Embassy Gardens in Nine Elms were mostly sold off-plan to
natives this year. Meanwhile the foreign money may be spreading farther out.
Angela Lin, who runs JA One, a company which helps Chinese investors buy
British property, says that some of her clients are asking about buying flats
in places such as Manchester and Liverpool, where rental yields on city-centre
flats can be extremely high. Such cities have plenty of spare land and little
opposition to interlopers. As London s market begins to overheat, the rest of
the country is warming.