Should we blame empty foreign-owned apartments for London’s housing crisis? The data says no
London's housing crisis is worsened, maybe even caused, by wealthy foreigners buying up properties and leaving them empty. Right?
It’s an attractive argument, identifying a specific and unpopular culprit (the global rich) while spreading the notion that they are to blame for most of today’s social and economic problems.
Unfortunately, in this case, the figures do not stack up.
Let’s start with the question of empty properties – the number in London has halved during the most recent decade recorded by the Department for Communities and Local Government (DCLG). Throughout all of London’s boroughs there were 20,915 empty dwellings last year – down from 42,600 when comparable figures were first collected in 2004.
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You may feel that 20,915 still seems like a very large number, but bear in mind that there are 3.45m homes in our city. Thus, only 0.6 per cent of homes are vacant.
Secondly, let's examine the issue of prime real estate, designed to attract overseas investors.
Take a stroll along the Thames, and you may get the impression that residential developments in London are dominated by shiny new high-end blocks of empty investment vessels. However, yet again, figures remind us that such projects are only a tiny segment of the capital's housing stock. A mere 3.2 per cent of property transactions were completed by foreign buyers of prime real estate, according to Savills' latest data (from 2014). Over eight in 10 transactions (84 per cent) involved regular Londoners simply buying somewhere to live.
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Even if we focus exclusively on London’s new-builds, economists at Savills estimate that less than one in six are "prime" (defined as any flat or house that costs more than £1,000 per square foot – a generously broad definition). That ratio is undeniably modest, and it would be even smaller if the authorities allowed us to build more of the most in-demand properties.
Demand at the affordable end of the market considerably outweighs the expected supply of new homes between now and 2020. We need an extra 37,000 net completions every year in the "affordable" and "lower mainstream" brackets, but just 11,000 are predicted to be built. This is the main factor behind London's runaway housing costs, and it has little to do with a handful of posh apartments sitting empty beside the river.