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GLANZ Jonathan

Cllr Jonathan Glanz is the Cabinet Member for Housing on Westminster City Council

Almost every day we hear that the housing market is picking up, prices are rising or that government intervention is fuelling a new housing bubble. Leaving aside those statements, it is undoubtedly true that property prices in London have largely weathered the financial storm of the last few years. A major contributory factor in this has been the investment in London homes from abroad.

A survey published by Knight Frank in August this year showed that 75% of new homes in Inner London are being bought off plan by foreign investors. Perhaps understandably, this phenomenon has attracted concern from a wide range of commentators, politicians and people looking to get on the housing ladder. The think tank, the Smith Institute last year asserted that the growth in foreign home ownership in London was causing a “distortion” and “dysfunction” in the London market.

I am all too aware of the issue. As the Cabinet Member for Housing for the City of Westminster, an area with more foreign owners of property than anywhere else in the country, I am greatly concerned about the affordability of homes in the city, especially for young people who have grown up here and work in the area.

This is not, however, a purely black and white issue. There is another side to the story. Developers report that foreign investment is driving development and bringing the much-needed economic boost that we all benefit from. Estimates by developers suggest that delivery of new homes in central London would, according to their estimates, be 40% lower without the investment from abroad. This would obviously create another additional upward pressure on housing costs when a third of households are struggling to meet their housing costs and businesses are beginning to report that the high cost of buying and renting homes in the capital is affecting their investment decisions.

There is an impression that all of the new homes built through foreign investment are multi-million pound luxury homes at the very top end of the market but the new homes we are talking about extend to affordable homes and everything in between. Instead, the forward sales from foreign buyers provide not just the financial capital to build but perhaps more importantly, affords the developer with the confidence to invest time and resources on a scheme.

For the vast majority of developers who rely on bank finance to deliver schemes, in order to advance the initial capital, banks will often require pre-determined levels of sales to be achieved at various milestones. Without these forward sales – some of which are from abroad – schemes will simply not proceed. Estimates suggest that approximately two-thirds of the large scale projects in London are financed on a similar basis.

Another myth about many of the homes in foreign ownership is that they are mostly left unoccupied creating ghost communities in the heart of London. One developer I spoke to refutes this, pointing to electricity usage on their developments which shows that 95% of its foreign-owned homes are in permanent occupation.

Tackling the housing affordability crisis will only be achieved with a once-in-a-generation house building boom. At a time when almost a quarter of a million households are being formed each year and the number of new homes built each year is barely half of what is required, it is self-evident that we need new homes and we need them quickly. Where ever the money comes from to build we should remember that the homes are here and will be lived in by Londoners for decades to come.

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