International Capital Flows into London Property

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No. 2 – International Capital Flows into London Property 6 Conclusion Growing international investment in London property comes at a time of rising social inequality and significant distress in the capital’s housing market. Central government’s austerity measures continue to be felt via welfare cuts, and there is inertia on increasing the supply of affordable housing. With much new-build housing constructed to meet the desires of international investors and provide them with secure assets it seems that the private market, left to itself, is doing little to tackle housing need for middle and low-income households. The housing crisis has not appeared to affect the laissez-faire attitude of government to international investment patterns and the impact on the capital which have left many neighbourhoods with slender resident populations and homes used purely as investment vehicles. If London is to remain a vibrant, creative and inclusive city it must find new ways to plan for substantial increases in affordable housing. Furthermore, it must find new ways of funding this provision by securing financial gains from the very wealthiest investors in the London property market. Our research leads us to make three recommendations that could help to tackle the policy challenges raised by international investment in London’s housing market and alleviate the capital’s housing crisis: 1. The creation of an Inclusive City Fund To help address housing need, this fund would be generated by a levy on property sales by international buyers of homes with a value of £5m or more. Using land registry data we calculate this would generate around £85m per annum (this is based on a 10 per cent levy on the conservative estimate of 50% of £5m+ sales being to international buyers and having been bought for a combined sales total of £2.6bn over a three year period). The fund could also be used as an attractor for philanthropic funding given that the monies raised for this fund could be used to build social housing reserved for use by essential key workers and those on low-incomes, either administered by nominated housing associations, local authorities or a new body. 2. Closure of taxation and investment vehicle loopholes There is a need for more creative thinking and interest in how the property system is used to shield monies made through illicit means globally. This requires investigating and finding ways of re-orienting the culture of the financial services sector to emphasise its role as a national, city and community wealthcreator. Global co-ordination will be required to develop effective international codes and rules regarding flows of capital. International rules are needed to assist national policymakers and financial institutions who will otherwise face the pernicious choice of seeking to unilaterally impose tighter controls while other countries may benefit from new competitive advantages. In addition, real estate and development control systems in the UK are not configured to identify money launderers. New measures are required to help identify the beneficial owners of those applying for new planning permissions and contesting planning decisions. Details of ownership should be made public and on this basis money laundering checks should be made by national and local authorities.
No. 2 – International Capital Flows into London Property 7 3. Joining the dots Policymakers need to be held to account for the creation of a housing system that rewards landlordism and privileges homeownership, while overseeing the decline in fortunes of working renters and prospective owners who are forced to compete in a market that has been made even more expensive by speculative investors. Housing need in the capital should be understood as being the result of a failure of the market to provide sufficient and affordable housing for households, the increased ‘tax’ on households generated by inflated costs and subsequent price displacement pressures, and the sustained decline in funding for social housing occurring in tandem with welfare cuts. Future planning legislation should include more ambitious targets for affordable and housing association provisions in new developments, and policymakers should consider introducing a minimum affordable housing provision for each London borough. In addition higher rates of council tax could be imposed on homes left vacant for more than three months of the year. Annex Land Registry transactions within Greater London, 2011-2013 Price Cutoff All Greater London 2011 £ sum 2011 Transactions 2012 £ sum 2012 Transactions 2013 £ sum 2013 Transactions 2011-2013 Total number of Transactions 3,7561,790,841 89,793 40,117,897,891 92,106 47,128,435,817 99,139 281,038 £1m+ 9,038,010,728 4,745 10,358,615,190 5,127 13,911,335,655 6,843 16,175 £5m+ 1,120,040,311 158 1,883,152,035 218 2,356,803,615 307 683 £10m+ 223,475,000 17 753,993,589 47 756,084,295 55 119 £1,350,000+ (top 1%) 6,838,845,654 2,848 7,987,175,557 3,085 10,895,585,289 4,253 10,188
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International Capital Flows into London Property

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