Foreign Investment Blamed For 'Safety Deposit Boxes In The Sky'

Rachel Holdsworth
By Rachel Holdsworth Last edited 38 months ago
Foreign Investment Blamed For 'Safety Deposit Boxes In The Sky'

Artist's impression of the Greenwich Peninsula development

The Guardian has uncovered figures showing that foreign investors own sites where 30,000 homes are due to be built in London.

Hong Kong-owned Knight Dragon is behind the Greenwich Peninsula development, where 10,000 homes will be built by 2019, out of 17,788 homes planned for Greenwich borough. In Hammersmith and Fulham, 73% of the planned homes are coming out of the pockets of foreign investors and the Malaysian-owned Battersea Power Station development pushes Wandsworth's foreign-backed building to 53% of its total.

We don't believe that where the money's coming from to finance construction is the problem. Are homes getting built that otherwise wouldn't have? Great. The problem comes if the homes being built aren't suitable for normal Londoners, if what's being built are luxury 'safety deposit boxes in the sky', as the Guardian article puts it. And sadly, that is largely what's happening, but it's not an automatic consequence of foreign companies building in London. We'd say it's rather a consequence of allowing the free market to run rampant over the capital's housing market.

Land prices here are exorbitant. If a development company — any development company — buys up a patch of land, it's going to need to build something more upmarket than your standard block that the likes of us can live in, simply to recoup costs and make a profit. That's unless it is a housing association with a duty to provide low cost housing, or is in receipt of government funds to do the same. If investing its own cash, a property company will go all-out for high returns. Capitalism, innit?

Over at the Greenwich peninsula, Knight Dragon managed to persuade the council to let it build the "affordable" housing tucked away to the south, away from the impressive river views that will command high prices on the private market. One 24-storey building, The Lighterman, is already sold out — we can safely assume off-plan to investors, attracted by the "Conran + Partners designed interiors". We can also safely assume that flats in The Fulmar, with its "private residents' roof terrace for glamorous evenings at home", and The Waterman, with its private cinema room, won't be on sale in your local estate agents' for £250k.

But will Wood Wharf, owned by the (currently, and technically, British) Canary Wharf Group, be any better? The Isle of Dogs development will create 3,610 new homes, of which 25% will be "affordable". But 25% of Greenwich Peninsula's housing will be "affordable", it's just that it'll all be concentrated in the crappier bits. Another safe assumption is that nobody on an average salary will be able to get near a flat in the Herzog & de Meuron 'Loofah Tower'. That's the problem. Not where the money's coming from.

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Last Updated 27 December 2014

jim1999

How quickly people forget that Canary Warf was developed by a Canadian company way back when - those pesky foreigners and their investment. By the way the company, Olympia and York, went bust building Canary Warf the first time around - who knew there is incredible risk in development. Only fitting that another Canadian company, Brookfield, is looking to buy it now.

This is anti foreigner hysteria that borders on UKIP a territory and should be called out on it.

Shakti Shekhawat

You do realise that the lighterman, fulmar and waterman that you've praised above are all in the crappier south bits of greenwich peninsula?

Fred Smith

I believe the article is not trying to blame investment in property development, be it foreign or local, per se, but is apparently pointing the finger at the raw product, land, and the end product, housing, being treated as an investment vehicle to an extent that overheats the market and detaches the underlying value (shelter) from the market value, so that those who need the former cannot afford the latter. Part of the problem may be this disconnect, but it may also in part be fueled by what appears to be the more favourable taxation treatment of income from investment as compared to income from labour. Apart from some exemption for those using housing for its original purpose (primary residence), there seems little justification why capital gains from property investment (or any other investment for that matter) should not be taxed as additional income at the appropriate corporate or personal rate (taking into account some measures to mitigate against corporate and personal tax minimisation schemes). In an era where housing prices far outstrip wage and salary growth, there appears to at least argument to look at reforms similar to the capital gains tax system used in Australia, which also helped broaden the tax base, reducing some of the reliance on taxation of income.

Richard

There are definitely problems with a lack of taxation on buy to let - it is ownership that makes people care about their environment. I wouldn't blame the free market for a lack of affordable housing though. I wonder what the effect would be if we didn't prop up high rents with housing benefit payments? And how much would prices come down for everyone if social housing was released into the free market? London is an expensive place to live ... perhaps some people need to consider living elsewhere? Apparently places like Birmingham have a burgeoning arts scene for just this reason.

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