Just days after the Brexit result, there were thousands of signatures on a petition to separate London from rest of the UK after the decision to leave the EU. Indeed, London’s future housing stock could suffer much more than nationwide if EU migrants are forced to go home. Government figures estimate that, nationwide, 12% of the construction workforce comes from abroad. David Thomas, Chief Executive of Barratt Developments, estimates that a massive 30-40% of Barratt’s workforce in London originates from mainland Europe. If new legislature saw a mass exodus of EU nationals from the UK, it would have a massive effect on construction nationwide, and more startlingly so in London.
A Change Of Direction
The housing situation in the UK has changed trajectory in recent times. Margaret Thatcher’s Housing Act 1980 ushered in a new generation of homeowners that would see a large increase in ownership in England and Wales. The percentage of homeowners hit its peak value of 69% in 2001 and has since been decreasing. Increasing rents (that prohibit saving for deposits) and higher property prices may lead to what some have termed “generation rent.”
With a salary of £64.000 (£106,000 projected in 2020) being the average for first-time buyers in the capital, it is perhaps no wonder that many are looking to place responsibility somewhere. Some lambast foreign investment and ownership in the capital. In recent times, Londoners will have seen the construction of many new high-rise developments. Two-thirds of the apartments in Britain’s largest residential tower block, St Georges Wharf in London, are foreign owned. Property in the UK is seen as “dirt cheap” by Far Eastern Investors, such as those in Hong Kong or Singapore. However, a delineation must be made between prime properties (over £1m-£2m) and builds, like St Georges Wharf, and those that are more affordable (under £450,000). Each type has a very different type of foreign investors, who in turn differ in volume and behaviour.
How Londoners Cannot Live In London
Many Londoners feel priced out of affordable homes in the capital. The argument is that Far-Eastern middle-class investors are driving mid-market prices up. Figures must be collated to get the full picture. Knight Frank reported in 2012 that 73% of new homes in London were foreign purchased. However, many of these may have been prime properties in prime areas – an irrelevant sector to most people. The above figure is also misleading because these foreign investors have not really bought these new off-plan homes: they funded them. One must question whether this funding would be available from within the UK. Data from Savills in 2014 may show blame should be cast elsewhere. They say non-resident foreign buyers of non-prime property in London only accounted for 4.44% of all property purchases (7% when including prime property). When accounting for residents and all purchases and not just new ones, foreign investment is much less significant.
in the UK comes from abroad
Further complications exist. Foreign investment will include purchases by offshore trusts, whose owners may reside in the UK. There is consensus that mid-market London housing is being sold off at housing fairs in Asia long before anyone else is given a chance to purchase them. However, experts like Adam Challis, head of residential research at JLL, say domestic demand is not strong enough, and restrictions on overseas investment could actually reduce the number of future affordable homes. The London mayor Sadiq Khan said he aims to give Londoners the first option on buying new homes that are built in the capital. All in all, he may have his work cut out for him, given Brexit and any legislature changes that may come with Theresa May’s new government. Already, the recent fall in the pound might make property in the UK even more attractive to those overseas.