The Nationwide reports London house prices have increased by a fifth in one year, why? And what are the consequences?

House prices in London

For the most part of the twenty-first century, London has experienced a growth in house prices, continuing a trend begun in the late 1980s. The most remarkable feature of the growth is that it continued through a period, 2007-2014, during which house prices in many parts of western Europe experienced a fall and stagnation, prompted by a reluctance by banks to lend amounts of money, which they had been prepared to lend prior to 2007. By the end of 2013 London house prices, whose growth had slowed, started to escalate with asking prices in September 2013 prices 5.6% higher than the previous high in July of 2012 culminating in a boom in 2014. In April 2014 the Nationwide reported that London house prices had risen 18% in the year to April 2013, to £362,699. The Guardian reported, ” Estate agents and homebuyers have reported frenzied demand for property in the capital, with homes attracting huge numbers of would-be buyers. Peter Rollings, head of London agents Marsh & Parsons, said there had been unprecedented levels of demand and record sales, with 48 potential buyers registered for each available property in south-west London.” “A two-bedroom, ground-floor flat in Balham, initially advertised at £450,000, recently attracted 107 viewings and 53 offers. It eventually sold for £549,000,” he said.

 

Geographical spread

Whilst house prices have risen in London throughout the twenty-first century, housing in the most salubrious and expensive areas of London has witnessed the greatest growth. Until 2013 house prices were rising faster in the center of London, in the Boroughs immediately bordering the center of London, and in the wealthier suburbs situated at some distance from the center. However, in 2013 onwards, there was a surge in the asking price of houses at the bottom end of the market.

 

Explaining the rise in London house prices

There are several explanations for the steady rise in London house prices, and why prices in London continued to rise whilst prices in western Europe buckled and fell. Key reasons are an increased number of people wanting to live in London outstripping the rate of new building; government subsidies for borrowers including commitment to guaranteeing bank mortgages and providing equity loans to would-be borrowers, increased number of people from EU countries wanting to move to London or invest in London housing to avoid the economic uncertainties of the European Union, people from all around the world investing in London housing and the land on which the housing is built, believing that buying the land and/or house will yield a strong return if it is sold at the right time in the cycle of rising and lowering house prices.

 

Population increase exceeding demand for housing

There are supposedly more people wanting to live in London than there are houses being built.

London’s population has grown, principally because there are more people that want to come and live in London than there are wanting to leave. People come to London for several different reasons, all of which are documented in the section on why come to London, and which are briefly resumed here. The growth of the banking and financing sectors, has sucked in an international army of mercenary financiers and bankers, together with a panoply of international investors, who use London’s financiers and bankers to manage their money. There is a general population growth in the United Kingdom, the result of years of relative prosperity encouraging economic migration into the country and into London. In the twenty-first century London has become regarded as an attractive site for international businessmen and women, looking to establish a European base. This has been encouraged by the United Kingdom’s low rate of corporate tax, which makes it a good place to increase profit margins everything else being equal. London has also been seen as a place to holiday and to enjoy the high life, which has prompted many wealthy people from around the world to purchase properties in the city, and especially in the west end. Members of the ruling families in various Middle Eastern states, made rich from the sale of oil, have chosen London as a summer holiday destination, since the 1970s, during which time their traditional summer destination Beirut, experienced a spiral of decline following the civil war in Lebanon. Since then Arabs have found that in London they can benefit from the warm but cooler climate, and enjoy the dining, shopping and entertainment. To make their stay that bit more comfortable many have purchased town houses, flats and mansions in the most expensive areas of southwestern central London. Businessmen grown fat on the mineral wealth of ex-Soviet Union have also invested in London property, Roman Abramovich and Boris Borozevsky, noticeable examples.

Economic migrants experiencing a range of different living standards arrive in London, understanding it to be a place of opportunity to improve their material condition. Migrants include people from impoverished rural parts of Turkey, Iraq and Afghanistan. It also includes Europeans who because of their ethnic identity or religious preferences find it difficult to gain work. Thousands of French people have come to London over the last two decades, having been eschewed by Parisian employers for being from the wrong neighborhood, wrong ethnic group or even the wrong college. It also includes Euoprean middle classes, who although they have reasonable material lives in the country they come from, believe London offers better career opportunities and a more liberal social climate. Many French people have actually come to London to forgeo the better material conditions they experienced in France, for the opportunity to change or progress their career or ambitions of setting up a business, London having rules and regulations, and a spirit and culture, which fosters risk taking, change, innovation and ambition in the economy and employment sector. Far Eastern Asians from places like South Korea and Japan also venture out as far as London, finding the cultural freedoms and tolerance of London a breath of fresh air contrasted with the regimental expectations of their home country and family.

In any case the number of people coming to live and work in London is not, apparently matched by the rate of building of new housing in the city. That this is said, is clear, but quite what the statistics are I don’t know. Furthermore how one could ever quite work out how much building would need to be built to accommodate all the newcomers, such that accommodation prices would be deflated is not known.

I suppose the general point here though to be made is that London’s population is growing in size, the rate of new housing being built is not in keeping with that, and so it is argued that as a consequence the prices of London’s housing is increasing as a result.

 

The London housing bubble: investment and speculation

London’s house prices have risen not just because the population increase in London is oustripping the rate at which new housing is being built. They have also risen because financiers and bankers, within and beyond London, have invested in London either to keep their money safe or speculatively expecting the market to pay good dividends.

 

Investment

With increasing demand for housing and a strong economy attracting people into it, the stable growth in London’s house prices has attracted and been pumped up by international investors, looking for a stable investment, in times of economics uncertainty. International investment from wealthy Europeans was prompted by the great western bank robbery, which started in 2007. The financial crisis affected many parts of the western world, and created economic and political insecurity and upheaval. Many western Europeans, who believed their money and assets to be unsafe, and fearing collapse of the Euro, responded by selling up and investing in London property. Large numbers of Greeks, Italians and French have all said to have resorted to buying into the London property market. Reuters news agency suggests that the so-called Arab Spring, which has turned out to be nothing more than the Arabs Sprung, led to rich Arabs investing in London property. Furthemore Reuters reported in 2014 that, “Knight Frank, a specialist in upmarket properties, said it had seen online enquiries about British homes from crisis-hit countries such as Argentina, Ukraine and Turkey soar over the past year.” In 2014 a recent report by right-wing think tank Civitas, called Finding Shelter, cites statistics showing that 85% of prime London property purchases in 2012 were made with overseas money. The Guardian reports that, “Estate agent Savills found that last year £7bn of international money was spent on “high-end” London homes, with just 20% of that spent by UK citizens. Two-thirds of homes bought by people from overseas were not purchased for owner-occupation but as investments. overseas buyers are also acquiring less expensive newbuild homes. It says that over the past two years only 27% of new homes in central London went to UK buyers, while more than half were sold to residents of Singapore, Hong Kong, China, Malaysia and Russia.

 

Speculation

Others of a more speculative bent invest in London housing because they believe it will pay rich dividends, perhaps far greater than many other things they can invest their money in. London’s financiers and bankers are speculating in London housing, forcing prices up further. The bubble grows and grows. Anticipating long-term growth, investors continue to plough money into London property, and in so doing fuel the bubble, that encourages others to invest. On the 4th March 2014, it was reported by Patrick Collinson of the Guardian that an investment company called London Central Portfolio aimed to purchase £100 million’s worth of 1 and 2 bed room flats in Mayfair and other areas of west London, based on the belief that by 2050 such flats will be sold for £36 million a piece. Hugh Best, LCP investment director, said: “The average price in prime central London is now £1.5m, and has been growing at 9% a year, which we think is firmly sustainable. They have been growing at that level for 40 years and we see no reason for that to change.”

Foreign investors, who do not want to live in London, and who may have never been to London also speculate. The appetite of foreigners for speculation in the London housing market is by itself prompting developments costing billions of pounds, many of which are being funded by foreign developers. At the beginning of 2013 the majority of buyers of 866 luxury apartments planned for Battersea Power Station by a Malaysian developer were foreign, with Singaporeans taking more than any other foreigner type. In 2013 estate agents selling flats in Elephant and Castle targeted investors in South-East Asia. Far eastern businessmen own most of the property around Canary Wharf and Limehouse. Vantage Properties, an estate agent in Canary Wharf, have offices in Hong Kong and Shanghai and employ many Chinese staff.It has been suggested that in the not too distant future the plan of the Chinese government to liberalise hedge funds, is likely to result in a wave of investment from China into London’s property market.

The inhabitants of Bishop’s Row in Hampstead is a good example of how rich foreigners have sought and secured some of the most opulent properties in London. Rob Booth gives a description of the foreign investment that has ocured on the street, “Over the last half a century this curving road near Hampstead Heath has become a haven for the winners and losers of numerous geopolitical shocks. Royals flushed with oil wealth from Nigeria and Saudi Arabia were among the first to come. Iranians fled here after the fall of the shah. Now Chinese househunters are following Russians and Kazakhs who have spent millions securing an address estate agents tell them is as world famous as the Champs Elysées and Rodeo Drive… The avenue is home to Princess Al Jawhara bint Ibrahim Al Ibrahim, widow of Saudi Arabia’s late King Fahd, and Richard Desmond, owner of the Express newspapers. He also noted that the Land Registry records show how a portfolio of 10 mansions on Bishops Row was assembled between 1989 and 1993, by the House of Saud, around the time Saddam Hussein’s sabre rattling in the Gulf threatened the House of Saud.

Speculation and foreign investment in London housing has been encouraged by successive British governments. Unlike in many other countries foreigners can invest in London property, without having to pay tax on the income that they generate outside of the United Kingdom. This makes London a less expensive capital city to stay in, than other comparable western European capitals. Furthermore successive governments have resisted building social housing on a large scale, to provide decent homes for London’s poorest, instead preferring to pump state money into banks, so the banks can provide mortgages, helping increase the relative wealth of home owners.

 

Government subsidies for borrowers

In 2013 house prices in London experienced a further boost when the Conservative Liberal Democrat coalition government provided financial support to young bankers and speculators, as part of two schemes designed to increase the relative wealth of people who already owned their own homes.

The first Help to Buy equity loan scheme, offered a loan to borrowers looking to buy new homes. The loan had to be used in conjunction with a loan provided by a bank. The loan offered by the bank offered a lower interest rate than that offered by the bank, which meant the government was subsidizing the interest paid by borrowers. The other Help to Buy mortgage guarantee scheme involved the government guaranteeing mortgages provided by banks given to people with a deposit between 5% and 20%.

 

The effects of the government subsidies

The Help to Buy equity loan and mortgage guarantee scheme were not designed to help prospective borrowers who lack the income to meet the repayments that would be needed on a London property. Instead it is designed to benefit those who have a good strong income, but little savings, as in the case of young people working in banking and the financial sector. It has also been suggested that those who might benefit most from the mortgages are people who could afford to pay a bigger deposit, but who in taking advantage of the new 95% mortgages, can pay less of a deposit and use their remaining cash as a mortgage to invest in another property. Speculators, then, looking to cash in on short-term increases in house prices, can use this scheme to get more mortgages and buy more houses, with the same amount of money.

In October 2013 it was reported that the asking prices for houses in the lower end of the market was beginning to skyrocket. It has been suggested that one of the reasons for this is that speculators, expecting the government’s schemes to increase the number of people able to borrow to buy, are buying now to cash in on later increases in house prices, and that this in itself, is causing house prices to rise. So for example in the last six months of 2013, houses for sale in Tottenham, of around the three hundred thousand pound mark, have increased in value by fifty thousand pounds. Speculators are, apparently buying the properties off private landlords, who had, until recently, until changes to housing benefits laws, been used to receiving high rents, subsidized by housing benefit. The size of speculation is thus creating a self-fulfilling prophecy. The government’s scheme, designed to increase the relative wealth of homeowners, through promoting speculation, is increasing the theoretical wealth of homeowners, before the scheme has even kicked into action.

 

How the very rich trade property

Apparently there is a new trend amongst the very rich, not to trade their property through publically accessible websites and estate agents, but instead privately, in a way that has been termed off-market. Apparently this is because people with such wealth, demand security, and they don’t want the floorplan of their home in the public domain. They also want discretion, and don’t want the world to know about their personal dealings and movements.

 

The mother of all Ponzai schemes

The elevation in house prices bought about by foreign investment and foreign and London based speculation comprises a huge ponzai scheme. As prices rise, so speculation in the London housing market looks a more attractive proposition, causing more investment. This will inevitably result in more private housing developments, as local authorities and developers seek to benefit form this inward speculative investment. However like all speculative activity, it will at some point crash. Interestingly, if and when it does, it wont just be Londoner homeowners who will be stung, it will have far reaching consequences around the world, for much of the new investment is coming from international investors from around the world.

 

Rising rents in London

Since the great western bank robbery, international investment and speculation in London’s housing stock has meant fewer Londoners have been able to buy, and more have resorted to renting. Together with the fact that there are more people wanting to live in London than property being built, rents have risen fast.

 

Affordable rent

During the twenty-first century Londoners have paid more of their wages in rent, than they used to. This is because since the great western bank robbery, international investment and speculation in London’s housing stock has meant fewer Londoners have been able to buy, and more have resorted to renting. Together with the fact that there are more people wanting to live in London than property being built, rents have risen fast. It also because in the second decade of the twenty-first century the government put a cap on the amount of housing benefit a family could claim, which in some cases meant families could no longer afford the rent being charged on their property, which meant they had to leave.

The government policy of capping housing benefit also had the effect of reducing the profitability of renting out poorly maintained properties in cheap areas. Taken together with another government programme, which aimed to provide government guarantees for 95% mortgages and offer low-interest loans to borrowers, and which promoted speculation in the low end of the housing market, the result was that private landlords have started to sell off to speculators. In Tottenham, for example, it has been said that speculators are coming in with cash and buying properties in the three hundred thousand pound range, from private landlords, with the intention of refurbishing and then selling on at a profit, once the government schemes have kicked in, increasing competition for London’s low end housing stock, and elevating prices.

 

The consequence for London and its people

The consequence of people investing in housing in London purely to park their wealth and/or to speculate, assuming that prices will continue to increase, is that some are not interested in renting the property out, but prefer to leave those properties empty. Several mansions on The Bishops Avenue in Hampstead have been kept empy for some years. According to Robert Booth of the Guardian, “A third of the mansions on the most expensive stretch of London’s “Billionaires Row” are standing empty, including several huge houses that have fallen into ruin after standing almost completely vacant for a quarter of a century. One property owner, the developer Anil Varma, has complained that the address has become “one of the most expensive wastelands in the world”. At least 120 bedrooms are empty in the vacant properties. The empty buildings include a row of 10 mansions worth £73m which have stood largely unused since they were bought between 1989 and 1993, it is believed on behalf of members of the Saudi royal family. Exclusive access to now derelict properties has revealed that their condition is so poor in some cases that water streams down ballroom walls, ferns grow out of floors strewn with rubble from collapsed ceilings, and pigeon and owl skeletons lie scattered across rotting carpets… More still are only used by their owners for short periods each year. Most of the properties in the most expensive part of the avenue are registered to companies in tax havens including the British Virgin Islands, Curaçao, the Bahamas, Panama, and the Channel Islands, allowing international owners to avoid paying stamp duty on the purchase and to remain anonymous..” On the same subject Robert Booth wrote, “A thick crust of bird droppings is piled on the gilded balustrade of one of Britain’s most expensive properties. Pigeon skeletons lie among shattered mirrors and water streams through broken cornicing…. Their Grecian columns are cracking into pieces and mosaic-tiled swimming pools are filled with rubble. Nature has taken over to the extent that owls have moved in. The waste is spectacular says Rob Booth, “In the grounds, stone fountains crumble and lawns have become bogs. Inside the Georgian mansion water drips through a huge crystal chandelier on to a thick carpet rotting under sections of collapsed ceiling. Moss grows through shattered bricks and mirrored tiles are scattered across a bathroom.” Robert Booth spoke to residents of Bishops Avenue, considered to be London’s most expensive street to buy a house, where many of the properties have been left to decay, and found residents describing a situation where 95% of the properties on the street weren’t really being lived in. Botth wrote, “One resident of the avenue, Magdy Adib Ishak-Hannah, an Egypt-born doctor, said he had never met his neighbours and believed as few as three of the properties were occupied full-time. Another resident from Iran, who asked not to be named, said: “95% of the people who live here don’t actually live here. It is a terrible place to live really. It is very boring and the road is very busy.” However according to Robert Booth of the Guardian Bishop’s Avenue is not the only place where peope are buying-to-leave, “Islington analysed electoral roll data for half a dozen new apartment buildings constructed since 2008 and found that, of the 587 dwellings, a third had no registered voter living in them or were marked as empty. For the Orchard Building, a block of 45 flats, 23 fell into that category.”

In 2014 Sadiq Khan, the shadow London minister, was quoted by the Guardian as saying: “London is in the middle of a severe housing crisis, yet there are around 50,000 empty homes across the city. It’s complete madness. We must stop housing that’s built as family homes being used instead as a piggy bank for the world’s wealthiest people.” The sales director of one estate agency in Knightsbridge was said by the Guardian to have described her clients as “international buyers looking for good two-to-three beds; a majority of them will use it just a few months a year”. The Guardian reports of the luxury One Hyde Park apartments in Knightsbridge that more than half the flats are registered with the council as empty or second homes. Architect Richard Rodgers, who knows a thing or two about housing in London, has, according to the Guardian reported high vacancy rates in Kensington in west London, another area favoured by rich international buyers who often spend little time in their properties.

In this way then investment and speculation in the London housing market works to literally hollow out London’s housing, and make in uninhabitable and off-limits for those who live and work in London, essentially reducing the housing stock available, which in some senses is equivalent to bull-dozing the properties. This effectively reduces the housing stock available to Londonders to buy, thus inflating the prices of the properties around them.

The effect is to lower the housing stock, which those who work and live in London compete for, and driving up prices. Furthermore those properties which are left empty are beginning to fall into a state of disrepeair. Of the mansions on The Bishops Avenue in Hampstead, which have been kept empy for years, trees, plants and mould are regaining what the builders had once taken. The consequence, perversely, is that one of the most expensive streets in London is turning into a mini-slum.

This hollowing out of London can be seen as another way in which the world’s rich, most of whom have gained their money through tax avoidance, corruption and cronyism, seek to tighten the screw on working class people.

The consequence of spiraling house prices and rents is that working Londoners, earning an average wage find it impossible to buy a property in London, and so have to rent or move out into commuter towns. However the rents in London are also rising, which means that most Londoners are paying a good deal of the earnings to landlords.

Even people who were earning, in London terms, a comparatively large amount of money could struggle to find a home in the part of London that they wanted. In 2013 it was said that Islington, a Borough on the northern outskirts of central London, which just forty years earlier had been considered a slum, was now unaffordable to most Londoners.

London home owners can however benefit from the price rises, either through selling their house, or remortgaging it.

Rising house prices are not good for anyone who wants to buy a bigger house, the gains to be made by selling their house will be outweighed by the extra cash they have to stump up for the property they want to buy.

Michael Goldfarb reckons that more expensive property in London has led to prices rising for restaurants, cinemas, bars and theatre tickets; although quite how that follows I am not sure. Some predict that teachers, artists, students and civil servants will no longer be able to live and contribute to London’s social mix. One headmaster in Earl’s Court said, ” Things are changing for the school, which reflect our changing community. We began to see the changes as the new benefit regulations were introduced. These have meant that families cannot afford to rent privately locally. This, coupled with the shortage of social housing, is having a profound effect on the school. At first the effect was subtle but this year there is evidence of dramatic change. In 2011, about 63% of children in the reception class were eligible for free school meals; this year only 23% are eligible, a reduction of around two thirds. Linked with this has been the rise in children whose first language is English. In 2011, only 18% of the reception class had English as a first language whereas this year 33% of the children have.” It has been argued that as London increasingly becomes a place for an economic elite it risks losing what is most exciting about its identity. One article in the Guardian states, “We can see this most explicitly in the way that flats in Shoreditch and Hackney and Peckham are too costly for the students and young artists that turned those neighbourhoods into creative hotspots in the first place”. Architect Richard Rodgers, who knows a thing or two about housing in London, has, according to the Guardian reported high vacancy rates in Kensington in west London, another area favoured by rich international buyers who often spend little time in their properties. Apparently this has caused social “erosion” and had left shops and other communal facilities struggling for enough business to keep going.

It is being suggested that with more and more wealthy people choosing to buy and live in London, together with government changes to benefits, which have effectively forced poorer people out of social housing most of London is being subject to a process of gentrification. Patrick Butler of the Guardian reports that, “Islington is changing as a wave of “supergentrification” fuels its colonisation by London’s financial elite. Exploding property prices mean that the middle-income, middle class professional families – teachers, mid-ranking civil servants, doctors, lecturers and journalists – who have traditionally made up the Islington “chattering classes” can no longer afford to put down roots, a phenomenon that researchers commissioned by the Cripplegate Foundation say will over time transform the character of the borough. By the end of the decade, families who do not qualify for social housing will need to earn £90,000 a year just to afford to rent in the area, while house-buying will be out of reach for most, leaving the borough a place where “only the very rich and very poor can live”, says the study. According to the report, welfare reform and low wages will drive out to the suburbs increasing numbers of working-class residents, especially single parents and large families, who will be unable to afford market rents because of tighter limits on housing benefit. The report’s co-author, Faiza Shaheen, a researcher at the New Economics Foundation, said widening social inequality and the gradual exclusion of low and middle-income families in Islington is replicated in other areas of inner London, such as Camden and Hackney.”

It has been argued that the capture of London’s property for international investors and London based financiers and bankers, will result in a changing of London’s social ecology. Michael Goldfarb has argued that most parents are raising their children in a place that – on current trends – will not be a place that they can afford to live when they grow up. In other words, the current economic changes will lead to a lack of attachment to community and people and place, the inference being that this will in turn lead to a deterioration in peoples’ mental and emotional health.

Ed Vulliamy reckons that the pace at which property is being bought up by international and London based investors is creating a culture of The Devil May Care as investors carry out large and noisy works, with no concern for how those works impact on the lives of the people around them. Certainly, since the beginning of the twenty-first century, oligarchs have arrived in London with dreams of building palaces of extravagance, in leafy suburbs and more central locations. The result is that all over London, the peace and quite and bliss of London’s luxurious and leafy suburbs are being split open, by the heavy industry of workmen, renovating and creating new palaces on prime plots. It has been reported in London media for the last ten years, that there have been a number of developments, causing an extreme amount of noise pollution, dust and general discomfort for neighbours. Ed Vulliamy complained that in Notting Hill, there was noise of this kind from 8 am until the evening, which made living in his house like sitting all day in a dentist chair, making it impossible to work from home, and turned one into a nervous wreck. Pavements were said to be impassible with all the works taking place.

Nigel Williams of Civitas poses the question “Who can afford a nice house than their parental home?” He points out that rising house prices in London are making houses to expensive for younger generations, with less savings and less earning power, to get on the housing ladder, and result in less likelihood that they will ever be able to afford a house of the quality of their parents. He explains that compared to their parents and grandparents, new housebuyers are faced with coming up with deposits, which are far greater, “Comparing incomes with house prices is not absolutely straightforward. On the one hand, historically low interest rates make the capital sums demanded more affordable; on the downside, less secure employment makes a long-term investment in a house purchase into a greater risk. Today’s first-time buyers are also contending with student loan repayments that did not trouble their parents. Still, the capital value of the property is the most important single item. When the parents or grandparents were buying, they might have reckoned on a deposit comparable to a years’ household income and three times that from a mortgage lender. They found their own ways of losing out – endowment mortgages, adding years to the mortgage term and payment protection insurance, for example – but if a house cost four times disposable household income it was affordable. Applying that standard today leaves many fewer people able to afford an average house.”

Other consequences might incude mass immigration. Robert Booth pointed out that, “Lord Adonis has already warned that Britain faces the risk of mass emigration of younger people to secure a better quality of life, including an affordable home.”

So in London we have according to one source 55,000 homes which are left empty, whilst 6,437 people were counted in 2013 as sleeping rough in the capital alone, and 344,294 households in London were on local authority waiting lists for housing. Robert Booth spoke to a security guard, who was guarding one of the derelict mansions on Bishops Row, who “said he had only recently been homeless and it was exasperating to see so many tens of thousands of square feet of property – enough to house dozens of people – falling apart. “How do you let something like this go to waste?” he said. “You wouldn’t, would you?”

 

Policy options and values

Current government policy, which has remained largely unchanged since the beginning of the twenty-first century, under Labour, Conservative and Liberal Democratic administrations, has been to create policies, which encourages the international rich, including London’s financiers and bankers, to buy up London property from the rest of London’s indigenous working population. The result has been to push London’s indigenous working population into renting. High rents have meant that London’s indigenous working populations have to give more of their income to rent than in the past.

A second alternative would be to increase the building of social housing in London, which would be dedicated towards housing people who worked and lived in London, and reducing the rent they have to pay. Alternatively, government could fund building, which could then be sold at subsidized prices, to working classes, and make it more possible for people to buy housing.

Aditya Chakrabortty explains that the housing crisis will not necessarily be solved by building more housing, the point is, he says, that there is already the capacity to house many of London’s homeless and houseless, its just that the properties are being kept empty deliberately by speculators, who are interested in making a fast buck by buying and selling, who do not have an interest in renting, and by rich people who buy holiday pads in London, which they use infrequently. The point is, then, that even if we did build a lot more new housing, this may still be snapped up by speculators, who keep it empty. Some have argued that those who maintain empty properties need to be fined to ensure that it becomes economic good sense to rent or sell to people who do want to live in the properties. Calls have been made, for example by Richard Rodgers, to introduce a severe tax on owners of empty houses, to make renting out or selling empty properties make economic sense. “We want to use planning policy to end the scandal of new homes being wasted in this way,” said James Murray, executive member for housing and development in Islington was reported by the Guardin as sayindg, “The criticism of ‘buy-to-leave’ is straightforward: it is wrong when new homes fail to house people. Londoners’ need for somewhere to live should come ahead of global financial investments. It is clear that timidity in the face of an unbridled market will fail.” According to the Guardian, “The coalition has allowed councils to charge 150% council tax on homes that have been empty for two years, and the mayor of London, Boris Johnson, has urged more to use the power. Labour said it will increase this to 200%, while Clive Betts, the chairman of the House of Commons select committee on communities, has suggested trebling the tax.” Islington Council is currently proposing introducing a fine of £60,000 where housing is left empty.

Alternatively it has been suggested that local Councils should be given increased powers to compulsorily purchase properties that are left empty, to ensure that they are then used for housing people. According to the Guardian, the Local Government Association, “which represents 373 councils in England and Wales, wants new rights to acquire empty homes on a leasehold basis, undertake refurbishment work, rent them out and then return them to their owners at the end of the lease.”

Alternative policy options include reducing international investment, to bring house prices down, making it easier for London’s indigenous working population to buy and live in London. A rightwing thinktank called Civitias recently suggested that rich people from overseas should be banned from buying housing in the UK, unless it can be demonstrated that the sale to an overseas investor can be demonstrated to add to the existing housing stock. However this is not in the interests of the banks and financiers of London, who make their position to the leading political parties of the day, very clear, in harshly spoken whispers in shadowy corridors and secret meeting rooms. No political party has had the balls to take on the banks in the interests of working people up to now. Although the Liberal Democrat’s deputy leader, did call in 2013, for government intervention to reduce the number houses and flats being bought by overseas buyers, and higher stamp duty or council tax on properties bought or owned by non-EU citizens or companies registered outside the EU.

It has been argued that politicians and the state should consider housing not as a commodity but instead as part of the nation’s infrastructure, like roads and railways, which requires state intervention to ensure a healthy economy and to improve well-being. Architect Richard Rodgers has argued that, “Housing is not just a private matter, it affects the quality of public domain, which we all need and which gives us security. Instead, this is seeing housing as if it were gold bullion.”
However, not everyone feels that housing should be lived in, that it should be considered as an infrastructural issues, many politicians are quite happy for housing to be treated as a commodity, to be traded, where some people have a lot of it, and others may not have much. According to the Guardian, “It was the prerogative of the “very wealthy” owners, one local Conservative councillor shrugged. “Sometimes they live in them, sometimes they don’t.” According to Robert Booth, “A Conservative councillor, Andrew Harper, whose ward covers the avenue, laughed when asked whether some of the derelict housing could become affordable homes. He said the land price would be prohibitive. “Very wealthy people own property there,” he said. “Sometimes they live in them and sometimes they don’t”. Asked whether leaving homes vacant for decades was acceptable, he replied: “That’s their prerogative. It is difficult to imagine what one would put in place to force things to be different to how they are.” Trevor Abrahmsohn, an estate agent who owns the company Glentree Estates, has argued, “Once you end people’s right to buy something and do as they please with it you have a police state,” he said. “One of the things people love about this country is its freedom and liberal views. You can’t start affecting what people do with their assets. That is sacrosanct.”

There is generally a feeling amongst some social commentators that people should be allowed to live stably in the community that they were bought up from. Whilst it is not a popular opinion to be against this position, Patrick Keiller, in an interview with Natalie Olah from Vice has suggested something along these lines stating, “There’s a lot of cultural and critical attention devoted to the experience of mobility and displacement. But often the emphasis is on their negative aspects, and we still tend to fall back on assumptions about dwelling derived from a more settled, agricultural past. This kind of place-centred dwelling is very problematic, as we see all the time in the Middle East, the UK and elsewhere. But that doesn’t mean that we can dispense with claims on territory, or with territory’s claims on us. That’s what tax-avoiders do – the super-rich think they’re above the level of the nation state. But equally, the idea of ancestral rights to settlement is just not practical. In the UK, hardly anyone isn’t “displaced” to some extent.”

Some institutions are coming up with creative ways of providing accommodation for poor people. In 2013 the Forest YMCA received planning permission, to transform shipping containers from China, into new homes in Waltham Forest, northeast London. The containers, which cost £20,000 each, will be rented out for seventy-five pounds a week, which is quite cheap. Apparently the containers will be fitted with en-suite bathrooms and air conditioning. The YMCA came up with the idea, after it had struggled to help young people, who had stayed in supported housing make the transition to independent living. It was pointed out that young people who were working were often unable to afford the costs of renting in the private sector in East London or able to afford the mortgage for a home. Certainly, necessity they say is the mother of invention, and peoples desperation to get their own place to live in London is causing some degree of innovation in the construction of new living arrangements. The YMCA is working together with Richard Rodgers to produce flatpack homes, which will cost £30,000 a piece. Oliver Wainwright describes the new homes as, “A neat oblong box with a simple pitched roof and jolly red garb, comprising a self-contained one-bed flat, with its own bathroom, living room and kitchen, all housed in a compact 26 sq m unit”. The building is built off-site in Derbyshire and craned into its location, the first ste of buildings are to be trialed in a site in Mitcham, South London. Andy Redfearn of the YMCA said, “With this speed of construction and implementation, it could be the perfect solution for brownfield infill plots and even sites where development is stalled, or where construction won’t begin for several years, such as HS2 land… The beauty is that the units can be moved off site as quickly as they are installed, as we operate on short-term leases – we expect people to stay for between three to five years, giving them time to skill up and save for a deposit.”

 

Protests against the selling off of social housing

High prices and high rents have prompted complaints from people who feel that the housing market is being driven by a profit motive, which effectively empties the coffers of normal working people, into the pockets of the bankers and financiers, many of whom robbed the working classes of their wealth in the decade leading up to the western financial crisis in 2007.

In 2013 a group of people squatted what was labeled as Britain’s most expensive council house,in Southwark, south central London, in protest at the lack of affordable housing for the normal working class people of the Borough, and the fact that Southwark was alleged to be selling off the social housing that it had. The ex Council flat, which was in need of renovation, was believed to have sold that same year for £3 million.

 

Advice for buyers

It has been suggested that buyers who feel they can afford repayments at current interest rates of 0.5%, should consider whether they could still afford repayments, were the interest rate to go back up to 5%. Patrick Collinson of the Guardian writes, “…a return to ‘normal’ rates of 5% or more has economists in a panic. But one day we will see base rates rise, and the cost of servicing big HTB loans needed to afford today’s prices really will toast the buyers.”

 

It’s a sellers market, and an estate agents market too

It’s a sellers market is the favourite expression on the lips of estate agents at the moment. There is such a demand for housing that sellers can now arrange just one viewing day, during which they can expect a torrent of would be buyers, most of whom have been vetted by the estate agents, who have to tender their highest offer to the buyer, usually in a blind one-off operation. Estate agents are now compiling lists of serious buyers, and advertising properties to people on the list, without publically advertising the property. Estate agents are suggesting mortgage deals which they can arrange through a broker, the implication being that if the potential buyer chooses the estate agent’s mortgage, they will stand more of a chance of securing the house they want. Estate agents are now charging the buyter rather than the seller, the commission they usually charge on buying a house, by charging successful buyer’s a two per cent, commission, reasoned to pay for the administration fee incurred by the estate agent in administering the tender process.

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One comment

  1. […] Further reading: House prices have increased a fifth in the last year. Why? What are the consequences? […]

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