Trellick Tower in west London. Photo: Getty
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Vast swathes of London are becoming unaffordable even to those on “good” incomes

London property is seen as a safe place for overseas investors to park their money. But with a lack of affordable housing in the capital while these properties sit empty, something has to change.

Barely a week goes by without a news story about overseas buyers snapping up London property. London housing has been described as a global reserve currency, with many seeing it as a safe place to park their money. There are anecdotal reports of areas of London becoming ghost towns as swathes of properties are left empty, with the architect of one such “ghost” development calling for a severe tax on those who leave homes empty.

London is a diverse global city where we rightly celebrate the fact that people from across the world want to live and work here. Yet there is a growing feeling that people with no intention of ever living or working here are profiting from our booming property market while those who do live here, wherever they’re from, are being squeezed harder and harder by our housing crisis.

But what is the real extent of overseas investment in London, what are the consequences of this and what, if anything, should be done about it?

These were the questions put to experts at a roundtable discussion hosted by me at City Hall. The event brought together a diverse range of voices from politicians and academics to developers and estate agents.

What is clear is that for all the newspaper headlines, very little research exists into the extent and effect of overseas investment. Estate agents Knight Frank have estimated that in the two years to October 2013 49 per cent of all new build purchases in ‘prime’ central London were made by overseas investors, 20 per cent in the wider inner-London area and 7 per cent in outer-London. In June 2012 the Smith Institute reported that 60 per cent of new homes in central London were bought by overseas investors.

The problem is that these figures rely primarily on data assembled by estate agents with differing methodology for a variety of purposes. No definitive data exists and no official monitoring takes place. The Greater London Authority would be in a prime position to commission such research. However, despite repeated requests from the London Assembly, the Mayor has so far refused to do so.

What we do know is that vast swathes of London are becoming unaffordable even to those on “good” incomes. The average house price is soaring towards the £500,000 mark. With most first time buyers unable to raise a deposit without help from their parents, and with historically low interest rates making saving unattractive, demand for housing is increasingly coming from those who already own a home as people enter the buy-to-let market.

For this reason it is clear that overseas investment cannot be looked at in isolation from domestic property speculation. However, with many new developments being funded by off-plan sales to overseas buyers how can local people feel that they are benefiting when a new block of luxury flats rises up over them?

There is a clear need to distinguish between different types of overseas investment: capital appreciation investment, where a home is bought purely to appreciate in value, and supply-generating investment, which results in an increase in the supply of housing for those who need to live and work here.

Perhaps the real question we should be asking is “how can we make overseas investment work for Londoners?”

Data from Islington suggest that homes being bought up by overseas buyers are increasingly being left empty. Across 10,000 homes built over the last six years in the borough there is a 3 per cent rate of properties in which no one is on the electoral register. Yet in several new developments in the south of the borough bordering the City that figure rises to almost 50 per cent. While the level of electoral registration is by no means a perfect measure of whether or not a home is actually being left empty, this level of discrepancy does suggest that something strange is going on.

In a city with an acute housing crisis, buying homes and leaving them empty is an obscene luxury that Londoners can ill-afford. Councils must be given much stronger powers to raise taxes on empty and even second homes. Given the level of capital appreciation we are talking about, the government’s decision to allow councils to charge 150% council tax on empty properties does not go anywhere near far enough.

Local authorities could also follow Islington Council's lead and impose planning conditions which specify that new homes must be occupied, requiring payments for those that are not.

Ultimately the reason people want to buy London property, whether they are from overseas or not, is that our houses are seen as commodities more than they are seen as homes. With house prices seeming to rise inexorably, property is becoming the only game in town for people with a bit of money to invest. After all, with most investments there is a risk that its value may go down instead of up. That risk in London’s property market is perceived to be very small indeed. The government’s announcement in the budget to allow people to cash in their pension will only stoke this problem as pensioners decide to enter the buy-to-let market.

The real solution is therefore twofold: making other forms of investment more attractive, and doing something to arrest the rise in house prices. The latter will require significant investment in new homes. What government, the Mayor and local authorities need to do is ensure that overseas investment contributes to an increase in the supply of affordable properties, rather than simply fuelling demand.

Tom Copley is a Labour member of the London Assembly

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Sooner or later, a British university is going to go bankrupt

Theresa May's anti-immigration policies will have a big impact - and no-one is talking about it. 

The most effective way to regenerate somewhere? Build a university there. Of all the bits of the public sector, they have the most beneficial local effects – they create, near-instantly, a constellation of jobs, both directly and indirectly.

Don’t forget that the housing crisis in England’s great cities is the jobs crisis everywhere else: universities not only attract students but create graduate employment, both through directly working for the university or servicing its students and staff.

In the United Kingdom, when you look at the renaissance of England’s cities from the 1990s to the present day, universities are often unnoticed and uncelebrated but they are always at the heart of the picture.

And crucial to their funding: the high fees of overseas students. Thanks to the dominance of Oxford and Cambridge in television and film, the wide spread of English around the world, and the soft power of the BBC, particularly the World Service,  an education at a British university is highly prized around of the world. Add to that the fact that higher education is something that Britain does well and the conditions for financially secure development of regional centres of growth and jobs – supposedly the tentpole of Theresa May’s agenda – are all in place.

But at the Home Office, May did more to stop the flow of foreign students into higher education in Britain than any other minister since the Second World War. Under May, that department did its utmost to reduce the number of overseas students, despite opposition both from BIS, then responsible for higher education, and the Treasury, then supremely powerful under the leadership of George Osborne.

That’s the hidden story in today’s Office of National Statistics figures showing a drop in the number of international students. Even small falls in the number of international students has big repercussions for student funding. Take the University of Hull – one in six students are international students. But remove their contribution in fees and the University’s finances would instantly go from deficit into debt. At Imperial, international students make up a third of the student population – but contribute 56 per cent of student fee income.

Bluntly – if May continues to reduce student numbers, the end result is going to be a university going bust, with massive knock-on effects, not only for research enterprise but for the local economies of the surrounding area.

And that’s the trajectory under David Cameron, when the Home Office’s instincts faced strong countervailing pressure from a powerful Treasury and a department for Business, Innovation and Skills that for most of his premiership hosted a vocal Liberal Democrat who needed to be mollified. There’s every reason to believe that the Cameron-era trajectory will accelerate, rather than decline, now that May is at the Treasury, the new department of Business, Energy and Industrial Strategy doesn’t even have responsibility for higher education anymore. (That’s back at the Department for Education, where the Secretary of State, Justine Greening, is a May loyalist.)

We talk about the pressures in the NHS or in care, and those, too, are warning lights in the British state. But watch out too, for a university that needs to be bailed out before long. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.