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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Why are boundary changes bad for Labour?

New boundaries, a smaller House of Commons and the shift to individual electoral registration all tilt the electoral battlefield further towards the Conservatives. Why?

The government has confirmed it will push ahead with plans to reduce the House of Commons to 600 seats from 650.  Why is that such bad news for the Labour Party? 

The damage is twofold. The switch to individual electoral registration will hurt Labour more than its rivals. . Constituency boundaries in Britain are drawn on registered electors, not by population - the average seat has around 70,000 voters but a population of 90,000, although there are significant variations within that. On the whole, at present, Labour MPs tend to have seats with fewer voters than their Conservative counterparts. These changes were halted by the Liberal Democrats in the coalition years but are now back on course.

The new, 600-member constituencies will all but eliminate those variations on mainland Britain, although the Isle of Wight, and the Scottish island constituencies will remain special cases. The net effect will be to reduce the number of Labour seats - and to make the remaining seats more marginal. (Of the 50 seats that would have been eradicated had the 2013 review taken place, 35 were held by Labour, including deputy leader Tom Watson's seat of West Bromwich East.)

Why will Labour seats become more marginal? For the most part, as seats expand, they will take on increasing numbers of suburban and rural voters, who tend to vote Conservative. The city of Leicester is a good example: currently the city sends three Labour MPs to Westminster, each with large majorities. Under boundary changes, all three could become more marginal as they take on more wards from the surrounding county. Liz Kendall's Leicester West seat is likely to have a particularly large influx of Tory voters, turning the seat - a Labour stronghold since 1945 - into a marginal. 

The pattern is fairly consistent throughout the United Kingdom - Labour safe seats either vanishing or becoming marginal or even Tory seats. On Merseyside, three seats - Frank Field's Birkenhead, a Labour seat since 1950, and two marginal Labour held seats, Wirral South and Wirral West - will become two: a safe Labour seat, and a safe Conservative seat on the Wirral. Lillian Greenwood, the Shadow Transport Secretary, would see her Nottingham seat take more of the Nottinghamshire countryside, becoming a Conservative-held marginal. 

The traffic - at least in the 2013 review - was not entirely one-way. Jane Ellison, the Tory MP for Battersea, would find herself fighting a seat with a notional Labour majority of just under 3,000, as opposed to her current majority of close to 8,000. 

But the net effect of the boundary review and the shrinking of the size of the House of Commons would be to the advantage of the Conservatives. If the 2015 election had been held using the 2013 boundaries, the Tories would have a majority of 22 – and Labour would have just 216 seats against 232 now.

It may be, however, that Labour dodges a bullet – because while the boundary changes would have given the Conservatives a bigger majority, they would have significantly fewer MPs – down to 311 from 330, a loss of 19 members of Parliament. Although the whips are attempting to steady the nerves of backbenchers about the potential loss of their seats, that the number of Conservative MPs who face involuntary retirement due to boundary changes is bigger than the party’s parliamentary majority may force a U-Turn.

That said, Labour’s relatively weak electoral showing may calm jittery Tory MPs. Two months into Ed Miliband’s leadership, Labour averaged 39 per cent in the polls. They got 31 per cent of the vote in 2015. Two months into Tony Blair’s leadership, Labour were on 53 per cent of the vote. They got 43 per cent of the vote. A month and a half into Jeremy Corbyn’s leadership, Labour is on 31 per cent of the vote.  A Blair-style drop of ten points would see the Tories net 388 seats under the new boundaries, with Labour on 131. A smaller Miliband-style drop would give the Conservatives 364, and leave Labour with 153 MPs.  

On Labour’s current trajectory, Tory MPs who lose out due to boundary changes may feel comfortable in their chances of picking up a seat elsewhere. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.