Many Londoners take it as read that the high cost of housing in the capital is the fault of wealthy foreigners. Assigning blame to speculators from distant lands said to purchase job lots of posh flats in skyline-wrecking towers then coolly leave them empty as their value goes through the roof reveals a Ukip streak in a Remain-voting city where 37% of people were born abroad and over 300 languages are spoken.
Everybody wants a piece of this populist narrative, including voices on the left. Mayor Sadiq Khan himself has cheerfully cranked out those crowd-pleasing lines about luxury housing units being stacked up like gold bricks both before and since he got elected back in May. How interesting, then, to report that his recently announced inquiry into the impact of foreign property investment in London recognises that reality might not bear out the rhetoric.
“We welcome investment from around the world in building new homes,” reads the first paragraph of a ten-page briefing document sent out by City Hall’s housing and land directorate to universities and other bodies that might be interested in bidding for the £40,000 research job. Paragraph two acknowledges “public concerns about the role that overseas money plays in London’s property market,” but goes on: “The GLA wants to ensure any discussion of policy responses is underpinned by clear evidence and understanding.”
Evidence and understanding? Whatever next? The document explains that “set against concerns over empty homes and a predominance of overseas buyers in local markets are reports of the positive role that overseas buyers play in enabling developments to go ahead”. A “positive role”? Good grief! It continues: “Off-plan sales are an important part of development viability. Industry bodies report that development finance can be difficult to obtain until 40% of units have been reserved and that most developers will not start construction on a development until a third of its units have been pre-sold.”
In other words, without the filthy rich from Russia and Hong Kong buying non-existent flats on the strength of CGI images of towers yet to be put up, fewer actual homes might get built in a city already delivering barely half the absolute number it needs. Surreal? Yes. Ideal? No. But it’s worth stressing at this point that a considerable amount of London’s new “affordable” homes aimed at people on low and middle incomes are built as a condition of permission being granted for large, foreigner-financed housing schemes to go ahead.
Yes, there are big concerns that developers use funny viability numbers to get away with delivering fewer such homes than they could. Even so, the fact remains that with no “rich foreign investors” sinking spare millions into future bricks and mortar, “affordable” supply in London, notably in expensive neighbourhoods, would be even more inadequate than it is.
The GLA briefing document says the research it wants done must address four broad questions: one, what proportion of new homes is sold to buyers who are resident overseas?; two, what proportion of new homes is kept empty and how many of these are owned by foreign buyers?; three, how reliant is development viability on sales to overseas buyers?; four, how does overseas financing of development contribute to housing supply?
Elaborating on these, it identifies problems of definition. For example, what is an “overseas buyer”, exactly? Is it someone from overseas who buys, or someone who buys from overseas? The document answers this itself: “The intention of the research is not simply to map the nationality of property ownership in London. Rather, it is to assess the extent to which homes bought in London are owned by people not normally resident in the city. Therefore, for the purposes of this research, ‘overseas buyers’ would ideally be defined as people whose principal residence is outside of the UK. This will therefore include UK nationals living abroad for a period of time but exclude foreign nationals who are normally resident in London”.
So, rich Britons who’ve settled abroad but purchase property in the British capital might be categorised as “overseas buyers”, while investors from other countries who’ve made London their home will not.
City Hall also wants a clearer picture of “the intentions behind the purchases” of overseas buyers. How many of the dwellings they buy really are just left empty as opposed to, say, used intermittently by family members or rented out? Answering this will involve addressing what exactly qualifies as “empty”. How frequently should a unit be unoccupied before that word applies? The document points out that information in this area is limited. Existing data have shown large falls in the numbers of empty homes in London in recent years, though these mostly record properties that have become derelict rather than new ones that aren’t much lived in. There is “no comprehensive assessment” of the extent of the latter phenomenon, the document says. The researchers’ job will be to provide one.
Khan wants the research to be the most thorough yet undertaken on the issue. His wish to go beyond the mix of vivid anecdote, emotive assertion and imperfect estimate that inform widespread beliefs about foreign property investment in London is welcome. It also shines a telling sidelight on the impact of Brexit: a “clear understanding” of “the role overseas investment plays in development viability” is deemed “vital” to any policy that “seeks to support Londoners’ access to new homes”. It may be that in these unsteady nationalistic times, London is going to need those much-derided rich foreign investors more and more.
