According to the Bank of England, each year since 2010, £23 billion of foreign money has poured into the London property market. One would think that this is a good thing for the economy, but most of these foreign buyers have never been to London, or at least have no intention of spending any time here.
It’s all about the preservation of wealth. The residents of unstable oil-rich countries fear the Arab Spring. The residents of China and Russia fear their governments. All are looking for stability. It has become the fashion to “park” money in London. It’s what wealthy people do when they don’t trust the banks, they “park” their money through the purchase of an asset, as a store of value. In this regard, the London property market has become a gynormous piggy bank.
In 2011, Regent Street was valued by The Crown Estate at £2bn. Each year a multiple of over 11.5 times this in ordinary homes is being snapped up. That’s the equivalent, each single year, of Oxford Street, The Strand, Fleet Street, High Holborn, Trafalgar Square, High St Kensington, Old Bond Street, Berkeley Square, Park Lane and Knightsbridge, and more. That’s just one year.
The reason government is doing nothing about this, is because the economy has been so delicate for the last three years, and the question of whether we are in or out of recession have been so finite, that any short term economic activity has been welcomed.
Far from rebalancing the economy, this government are just desperate to fend off the calls for a Plan B. Far from building a long term prosperity, they are trading the benefit of short term finance, for long term misery. This chancellor, who once accused Gordon Brown of being “dishonest” with the British people, is now covering the tracks of his own failure, fully in the knowledge that a future government will be forced to clear up the mess.
The dividing lines between Labour and the Conservative Party is clear. We believe the state has a role to play in building a better society, they believe that the market is supreme in every regard. We believe that government can guide or regulate the market as and when it becomes destructive. They do not.
In this case, the destruction is due to the sheer scale of housing that is being taken out of productive use. The situation has got so bad that even the bankers are being edged into poorer districts. This then bumps the next social class into the next district and so on. In my area of Tower Hamlets, period housing used to be priced at a premium, but as prices push against the ceiling of affordability, the prices of ex-council flats are coming into line with the Victorian terrace.
This phenomena has been building since 2008, and is set to continue and expand with ever greater destruction. Houses in Knightsbridge have risen so much that they are now 45% higher than in 2007.
As prices rise and foreigners become excited by their returns, more money pours into the market causing more housing inflation. If this speculative bubble were caused by the British population then there would be some constraints imposed by the size and the wealth of the native population, however, we are talking about massively greater forces at work.
As China pushes ahead with a sweeping plan to move 250 million rural residents into newly constructed towns and cities, the wealth of the developing world will grow exponentially. |Is it our role to give up our housing needs in order that they can have a vessel for their savings? If so, is the logical conclusion to all this that we cannot house ourselves due to properties being held empty in massive speculative bubble of foreigners? VIDEO
We keep reading polling that tells us this is not a major issue to the electorate, but that is the reason why Labour should be hammering the message home. Ever since George Osborne’s economic policies failed, we’ve seen increasingly dangerous long-term problems being created by a government who are only concerned with securing their own jobs. They will continue to do so until the Labour persuades the nation of their folly and creates a consensus for restrictions on foreign purchasing of London housing.