18th June 2013
A Central London property and investment firm is making the case for high net worth foreign buyers in central London arguing that numbers have been over-estimated and owners’ contributions to the UK underestimated.
The London Central Portfolio is concerned about calls from Lib Dem London MP Simon Hughes for restriction on foreign buyers of residential property as the BBC reported earlier this month. It also notes a report by LPP which said that 85 per cent of London’s prime core was purchased by foreigners last year.
CLP argues that these “headline grabbing statistics and provocative sound bites” belie the tenure of housing stock in Prime London Central (PLC), defined as the Royal Borough of Kensington and Chelsea and the City of Westminster, might surprise.
It says that with only 5,363 units changing hands in the last year, PLC is arguably the greatest capital city in the world with the lowest availability of property to buy. It says that according to the 2011 Census, buy-to-live investors (defined as buyers of first homes, “second homes” or pied-a-terres accounted for just 37% of the housing market here. CLP says this gives a possible maximum of 1,985 units bought by foreigners as second homes, assuming that every property is purchased by non-domiciles, just 0.3% of the total transactions in England and Wales over the last year.
It says this is the same number as changed hands in every single day in the rest of the country. Moreover, this number is rapidly shrinking as available stock continues to contract in Kensington, Chelsea and Westminster, transactions have fallen by 50% since 2000.
It says that at 38%, the biggest segment of the PLC market is actually bought for buy-to-let rather than for buy to-live investment, i.e. for the private rental sector which runs at almost 100% occupancy.
London Central Portfolio says its analysis shows that international buyers contribute £1.2bn per annum to the UK economy and Exchequer through buy-to-let purchases. Unofficially our “6th biggest export”, it supports a huge array of trades, professions and services nationwide, involved in the building, buying, design, refurbishment, letting and maintenance of rental properties.
LCP also says that the balance of the housing market in these areas of London comprises social housing with 25% of properties designated as socially rented. It says this represents a far greater number than the rest of the country, which stands at 18%, and leagues above Greater London which stands at 13%.
It adds that the Empty Homes Agency calculates that just 1.4% of properties in Prime London Central were long term empty. This compares with a slightly lower national figure of 1.1% long term empty.
Naomi Heaton, CEO of London Central Portfolio says: “It is undeniable that international demand has put an upward pressure on prices, the view championed by Simon Hughes that this tiny area of London should be ‘given back’ to Londoners, is undoubtedly flawed. To achieve this, prices in PLC would have to drop to just £253,000 or 18% of their current value, based on of an average salary of £39,000 in Kensington & Chelsea. It is not realistic to think this could ever occur and in reality, the economic fallout from this, in terms of jobs that depend on a healthy and growing property sector would not bear thinking about”.
“The intense adverse focus on such a small sector which contributes so significantly to the UK economy would seem to be politically motivated rather than economically driven or statistically assessed. It acts to divert attention from the real issue on how to provide more housing and in so doing, the government runs the risk of killing the golden goose.”