Empty London luxury flats draw election penalty vow

Wealthy foreign investors with buy-to-leave investments are being targeted by British politicians in run-up to next month's general election

PUBLISHED : Wednesday, 15 April, 2015, 6:00am
UPDATED : Wednesday, 15 April, 2015, 6:00am

Peter Rees' attempts to form a residents' association after moving into the City of London's Heron tower block were hampered by one major obstacle: he could not find many neighbours.

"We discovered just how difficult it was to trace owners who hadn't been near their flats," said Rees, a former City of London planning officer who owns a flat in the 284-home tower. "They were either unknown or uncontactable."

The phenomenon known as buy-to-leave, with some investors not even bothering to pick up keys to properties, is now becoming an issue in the May 7 national election as more than 460,000 British homes lie vacant. Tessa Jowell, a former Labour lawmaker tipped to replace Conservative Mayor Boris Johnson when he steps down in 2016, is making penalties for leaving homes empty a principal part of her campaign.

Johnson urged London councils to "whack up" tax on owners who allow their homes to stand empty for more than a year during a radio interview last year.

"Wealthy foreign investors are buying up London homes to leave empty as assets rather than homes in which to live, whilst hundreds of thousands of Londoners are stranded in temporary housing or stuck on housing waiting lists," said Jowell. "We urgently need to give councils tough powers to penalise those who leave homes empty."

Charlotte Palmer, a spokeswoman for Heron, said all but one owner had picked up the keys to their flats.

About 44 per cent of all buyers of existing homes in prime central London in the fourth quarter of last year were originally from overseas, according to broker Strutt and Parker. Almost 700 homes were sold in the period, a fall of almost a third from a year earlier, the broker said.

I do resent a waste of good land to create buildings that are only there for investment purposes. They are empty boxes on the skyline
Peter Rees, former City of London planning officer

Developers are seeking to appeal to foreign buyers, who favour flats, with high-rise, high-volume projects. At Greenwich Peninsula on the south bank of the Thames, builders have approval for more than 13,000 properties, according to Knight Frank. Across London, there are 192 buildings of 20 or more storeys planned or under construction.

The British government this month introduced a capital gains tax on future gains from flats and houses owned by investors based overseas.

The political furore over foreign buyers prompted builders including Barratt Developments, Taylor Wimpey and Telford Homes to agree to stop giving international investors the first chance to acquire new property in London in December 2013.

While most local authorities apply standard levies on empty homes, some of London's most expensive boroughs have had enough. Kensington and Chelsea this month added a 50 per cent premium to annual council tax fees for properties that have been left unfurnished and occupied for more than two years.

The new levy would affect 660 homes in the borough, the council said.

Islington is consulting on plans to make it a legal requirement that owners use or lease flats.

"We would encourage local authorities who are concerned about empty units in their area to focus on attracting investment into a large-scale, professionally managed build-to-rent sector," said Melanie Leech, the chief executive of the British Property Federation lobby group.

Islington started its consultation after it found almost half of the 127 full-priced homes at the Bezier project were empty without explanation. At the Worcester Point development, it was 33 per cent.

"I don't mind where the money comes from, but I do resent a waste of good land to create buildings that are only there for investment purposes," said Rees. "They are empty boxes on the skyline."