Is London falling out of love with foreigners
Friday, February 07, 2014 by Ed Mead
Estate Agents have always had a love hate relationship with foreigners, but most have learned to bite their lip given their buying power. Since the Oil Crisis and the Iranian Revolution in the 70s many have made their fortune servicing their needs. We know London is a great place to live and more or less anyone who’s made money anywhere in the World has always aspired, apparently, to own a property here and they’ve always been welcomed. My personal view has always been that they add lustre to our City and are seen to spend freely to the benefit of our economy. Two corollaries of the credit crunch have combined to make this issue of foreign ownership a far more pressing one. First has been that the Bank of England’s reaction to the crunch created a very weak Pound turning what was always a welcome trickle of foreigners into a somewhat unseemly stampede. Second corollary was that banks are much stricter when lending to developers and so these same developers now HAVE to seek forward sales to get their funding. The easiest way to get these is to send their agents off on a trip to HK or KL and sell 25% or more, sometimes almost all, off plan. This modus operandi has taught many, particularly in the Far East, how to invest in London – and they do.
Politicians are increasingly worried that the impression given is that foreigners are buying everything to the exclusion of native Londoners. A Tory MP friend recently articulated this which was reassuring insofar as it showed they are thinking about the issue. This issue is obviously hugely over exaggerated BUT is now a genuine area for concern and is a regular topic of heated discussion in the news media and on social media hence why politicians are having to react.
How to slow the flow is a natural question. CGT on foreign owned sales is simply bringing us into line with other World Cities and it’s difficult to see how any other measure could work without an actual limit on foreign ownership in developments. Even BoJo is talking the issue up despite having been a tub thumper for such investments earlier in his tenure.
You can’t blame developers for seeking such markets out, and a limit on foreign ownership per development would be difficult to police, but there ARE a huge number of Brits who’d like to invest in these developments who often feel they’re not being given a fair crack. To some extent developers could ameliorate this by marketing their developments locally as well as internationally. With this in mind I have no idea why most developers use two international names to market their developments. Usually these agents will have no local presence at all and seem to do the same thing, i.e. market themselves and the development internationally. This could well be part of the problem and perhaps the solution too. If developers wanted to salve local people’s concerns, and thus local politicians, they could do worse than have a good local agent alongside their international partner. Now I wonder who would fit the bill………..