Friday, 17 September 2010

Paper Houses

In the UK, as well as parts of the US, it is very easy, if you have sufficient cash to speculate on housing stock like it is a perpetual financial asset to be locked away in your safe until further notice. A rich foreigner, usually from an emerging market is wooed by fee driven estate agents with global offices to part with significant wads of cash to buy up housing in aspirational locations such as London and New York. London particularly. Despite its terrible weather, poor transport infrastructure, low quality housing construction and some of highest consumer prices in the world, London is close to the oil rich Middle East, and emerging nations like India and China, and of course the estate agents draw on the historic link both in language and culture of the old empire. This practice started in areas such as Mayfair a couple of decades ago and has spread to "prime" neigbourhoods such as Chelsea, Kensington, Notting Hill and Bayswater. There is inevitably, in the latest cycle of foreigners parking their cash in London houses, further neighbourhood creep to places such as Chiswick. The true English folk have turned to selling up their London pads to undiscerning foreigners and moving to the more attractive countryside. The Englishman's badly constructed London home is less a castle, more a discovered lottery ticket, one which is being happily discarded.

Not all governments turn a blind eye to the hoarding of housing. In Switzerland and Denmark for example the rules for buying as a foreigner or non-resident are prohibitive. These countries have sensible policies which make an effort to recognise that to keep the country socially cohesive and the economy stable, housing should be treated as vital infrastructure for the economy.

For the last two decades, the UK government has been turning a blind eye to this kind of disruptive house speculation. Spurred by the financial crisis, but perhaps more by the wise counsel of the Liberal Democrat party, the Conservative chancellor was forced to raise capital gains tax to dampen speculation on such things such as houses. If a wealthy oil magnate decided to buy up the railtrack of the country with a view to use it only for private journeys during the two weeks he visited Britain, the government might not be so sanguine. Arguably, the housing stock of any nation is as important as railtrack. It is time the government did more to override the interests of foreign speculators and estate agents in favour of its hard working residents.

5 comments:

  1. Absolutely spot on...

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  2. Good observation. Now if we could only get more people to pay attention to this disturbing practice.

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  3. Can't agree more - housing should not be an investment at all, just somewhere to live.

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  4. To compound the above we have the completely dis-functional council tax. Not levied on higher value properties, nor hoilday or second homes at full rate-higher payments up North etc. So foreigners dont even have to make a contribution to the infrastructure they do benefit from.((80% of local fninance comes direct from HM treasury). What a nonsense!

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  5. Surely selling over-priced junk to wealthy foreigners is in a long English tradition, and nothing reprehensible about it?

    If you want to provide better-quality accomodation for the natives, why not allow them to build rustic houses on green-belt land? Let rich foreigners continue to buy central London - perhaps it could be made a tax-free zone to encourage shopping - and everyone will be better off.

    But possibly the home-owning natives won't appreciate the consequences of such a liberal policy, and I wouldn't count on the wisdom of the Liberal party if you take this approach.

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