Londoners priced out of home market blast foreign buyers
As wealthy foreign buyers snap up supply and some developers favour luxury sales, locals say they are being forgotten
Cheryl Coyne shouted "No more homes for millionaires!" with protesters dressed as pirates outside London City Hall last week. Inside, Mayor Boris Johnson was approving a plan by Hutchison Whampoa to build as many as 3,500 homes close to where she lives.
"These are the kind of homes that local people will never be able to afford," said Coyne, a semi-retired schoolteacher who wore a striped shirt and a skull and crossbones neck scarf. "There are thousands of people in the borough who need homes, and instead they're building flats for multimillionaires."
The status of Britain's capital as a magnet for wealthy foreign homebuyers is helping to drive prices in many areas beyond the reach of most Londoners. That is putting pressure on politicians and developers to convince locals that they have not been forgotten in the rush to court overseas investors.
Foreign-born buyers made 69 per cent of central London new-home purchases in the two years to June last year, with 28 per cent living outside Britain, broker Knight Frank said in October.
London house prices increased 18 per cent in the first quarter from a year earlier, the most since 2003, Nationwide Building Society said on April 2.
"There is a head of steam building where people are seeing this situation, which is so blatantly unfair, and want firm action to be taken," said Darren Johnson, the chairman of the London Assembly's housing committee.
Speculation "does nothing for London whatsoever other than push prices up even further".
Developers have refocused their sales efforts on local buyers in response to criticism of their efforts to market some homes exclusively abroad. They have stopped short of closing the door on foreign investors.
Battersea Power Station, the derelict brick landmark on the south bank of the River Thames that featured on the cover of rock band Pink Floyd's Animals album, is one of London's largest and most talked-about housing developments.
When the project's Malaysian owners sold the first 866 homes in just three days in January, more than half went to foreign buyers. The second phase of more than 200 apartments goes on sale in London on May 1.
Rob Tincknell, the chief executive of Battersea Power Station Development, said the company called all 13,000 people who registered to buy the project's 3,500 homes and would give preference to those who said they intended to live in the homes they bought.
"The power station is a London building that people feel very passionate about and it would be totally wrong to have it sold off to people who are just storing cash in the UK and not living there," Tincknell said.
"On a more practical level, we have a lot of interest. We have buyers."
Hutchison's development, Convoys Wharf, is in an area founded by King Henry VIII as a dockyard in 1514. It includes 15 per cent affordable housing, or about 525 homes, according to a filing with the Greater London Authority. That is below the 50 per cent target set by the local council.
In a report to the authority, Hutchison said it could not provide more affordable homes and remain viable, according to the filing.
Daniel Prior, a spokesman for Hutchison, declined to comment.
Foreign investment in London property took off after the financial crisis in 2008 as a weaker pound, economic instability from Europe to Asia and record-low returns on fixed-income investments prompted wealthy buyers to search for assets that would hold their value.
Increasing numbers of Britons were left out of the market as banks restricted mortgage lending and unemployment increased.
Spending by non-British investors spread from luxury properties in boroughs such as Knightsbridge and Chelsea to new houses and flats as builders used advance sales, many to buyers from Asia, to finance projects amid tight lending for development.
A main reason for the local backlash: two-thirds of foreign buyers are investors rather than owner-occupiers, broker Savills said in November.
Home prices in the city, fuelled by government mortgage-assistance plans such as Help to Buy, climbed to a record of £362,699 (HK$4.66 million) in the first quarter, Nationwide said. That was more than double the national average of £178,124.
In December, a group of 11 British homebuilders, including Barratt Developments, Taylor Wimpey and Telford Homes, agreed to stop giving overseas residents the first shot at buying London homes sold before they are built. They agreed to offer properties at home and abroad at the same time.
"This really coincided with some of the negative press that was coming out about selling overseas and people leaving homes empty," Telford chief executive Jon Di-Stefano said at the time. "It's actually quite expensive to market overseas and the reason people are doing it is because they need to make early sales in order to increase what they're building."
For Adam Haycroft, a copy writer living in Hornsey, north London, availability will not make a difference if prices keep rising.
"We've cut things as hard as we can; we're sharing a flat, we're sharing a room," Haycroft said. "Even with that, we save about £1,000 a month and every time we reach what we think is a milestone, we look at the prices in London and realise we just can't get close to buying anything."
Programmes such as Help to Buy "just fuel the fire by pushing prices up further", he said. "They need to actively cool the market."
There had been a significant increase in mortgages available above 75 per cent of the value of the home bought, the Bank of England said in a report last week.
Johnson faces a balancing act as he courts foreign investment on travels to countries including China and Kuwait while trying to assure voters that he is sensitive to their concerns.
In a statement released by the Homebuilders Federation, he praised the decision to stop offering property abroad first. He also called foreign investment a "long-standing and necessary part of any global city's housing market".
It is too early to tell whether changes in marketing will have a substantial effect on the proportion of foreign buyers in the capital. In some of the most expensive areas, the market is changing by itself.
British buyers accounted for almost half of sales in Kensington and Chelsea and Westminster last year, up from 43 per cent in 2012 and 37 per cent the year before, as high prices reduced demand and an improving global economy provided more safe investments for foreign investors to choose from, broker Hamptons International said.
Londoners complain that much of the new development in the city includes flats that only foreign investors can afford.
Luxury-home developers, which often sell 30 per cent of flats abroad to finance construction, planned to build more than 20,000 properties in the capital with a value of about £50 billion in the next decade, Mark Farmer, the head of residential property at EC Harris, said in a November report.
The government has taken steps to increase the tax burden for luxury homes and properties owned by foreign buyers through companies.