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Even the Rich Are Being Priced Out of Central London
- naravara 10y agoThe Onion proves itself prescient yet again: http://www.theonion.com/article/report-nations-gentrified-neighborhoods-threatened-2419 http://www.theonion.com/article/report-nations-gentrified-ne...
- matt_wulfeck 10y agoWASHINGTON—According to a report released Tuesday by the Brookings Institution, a Washington-based think tank, the recent influx of exceedingly affluent powder-wigged aristocrats into the nation's gentrified urban areas is pushing out young white professionals, some of whom have lived in these neighborhoods for as many as seven years. All joking aside, 7 years is longer than anyone I know to be living in the same location. The article's satire nails it.
- gyc 10y agonottheonion: http://i.imgur.com/jb61R2B.jpg http://i.imgur.com/jb61R2B.jpg
- gnashville 10y agoThat's pretty special.
- paulsutter 10y agoi need to quote your link so nobody misses this gem: > ...many Palo Altans said the project was too big and moving too fast. "It just seems to me that a billionaire can come in and get whatever he wants and run roughshod over average millionaires like myself," said Crescent Park Neighborhood Assocition presi...
- artursapek 10y agoWhat paper is this? Is it available online? I hope you framed that.
- munificent 10y agoIs that Vint Cerf on the right in the photo? :)
- virtuexru 10y agoOh no; the rich aren't rich enough guys!
- smitherfield 10y agoI mean, it's a pretty common sentiment around these parts. (Replace "London" with "Bay Area") (It's a very rare person who ever thinks of themselves as "rich enough." Most billionaires don't)
- toephu2 10y agoHow many billionaires do you personally know?
- deleted 10y ago[deleted]
- HippoViolation 10y agoOne. can confirm!
- yomly 10y agoWhile I do enjoy the irony of this situation and your post, the schadenfreud isn't helpful. We're all in this boat together: When an unbridgeable gap is opening up between even the traditional "elite" (bankers, lawyers, consultants, doctors and now software engineers) and the 1% you have a real problem with social mobility. If a country has decent access to education, it's not unreasonable to aspire to reach the "elite" with some smarts, luck and grit. That fundamental hope is what ticks over the capitalist incentivisation we have based our economics on. It's what inspired my parents to leave their home country and climb many socioeconomic rungs. If you remove that belief in the system, people start signing out of society and then you have a big problem. Like Brexit. Like Trump. Then suddenly war doesn't seem so impossible anymore...
- scotty79 10y agoWhat bothers me is that price rises but those are the same crappy apartments. When a flat costs millions I'd expect it to be absolute marvel of modern technology.
- pjc50 10y agoProperty is entirely about who you outbid, not what the property is. Even my modest house in Scotland has an insurance rebuild cost of half its value. Meanwhile someone in London bought a derelict garage for over half a million: http://www.telegraph.co.uk/finance/property/house-prices/11196451/Britains-most-expensive-garage-sold-for-550000.html http://www.telegraph.co.uk/finance/property/house-prices/111... The solution will have to be punitive taxes on nonresident overseas owners. Preferably removing the council tax cap too.
- jrockway 10y agoThere is no financial incentive. People have their heart set on living in a super-popular city, but they won't pay extra for nicer finishing. They find all available money, then take out a loan that's 100% of their income (their income will go up over time, after all), and buy whatever is available. You can get a nice apartment, but you're talking double or triple the price of common "the walls were last painted in 1872" apartment. There was a nice 750sq ft. apartment in Brooklyn Heights I was looking at recently. 3 million dollars. Who has this kind of money!? (The key is being married to someone that makes as much money as you do; for me, 1.5-2 million dollars would then be very conservative. Good luck if you're single or your spouse doesn't work.) Fortunately, this is a New York-ism. If you're willing to move west (not to California of course!) then you can get a super nice home in a nice city for hardly any money at all.
- tacostakohashi 10y agoAbsolutely, I have been battling this lately with a 50 year old coop in Manhattan that needs renovation. The magnitude of pain involved is unbelievable. You want to strip and paint those 1872 walls? Guess what, lead-based paint, inspections, permits, abatement, management company, board approval, etc, the list goes on. It's basically not economical to re novate anything if you value your time, so if you value living anywhere nice you have to pay the 2000/sqft give or take for something modern.
- s_q_b 10y agoIn DC, there's a big glut in foreign capital flowing in from foreign oligarchs and elites, particularly from Russia and China. Residential properties in so-called "safe cities" are both a form of investment and a potential life-raft should the political situation change in their nations.In addition to the artificially low supply created by extreme height limitations, this has caused prices to skyrocket. The apartment in which my girlfriend and I live now was a cash purchase after only three days on the market with no escrow. It had to be, or someone else would have bested it. If you need a loan to buy? Forget it. Meanwhile, there are six immaculately tended walk-ups on the block that have been completely empty for the past year, but for the staff.
- conception 10y agoVancouver recently enacted an anti foreign buyer tax that seems to have almost completely stopped the practice. Curious if we will start to see more and more of this local protionism.
- jewbacca 10y ago> almost completely stopped the practice That is way overselling any evidence of what's happened. The tax was enacted less than a month ago. Volumes are way down right now, but the effect on prices are uncertain. I think the consensus is that people are in wait-and-see mode.
- deleted 10y ago[deleted]
- antisthenes 10y agoUnless every desirable city introduces this tax uniformly, doesn't this just shift the burden from Vancouver onto other cities?
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- r00fus 10y ago
- melling 10y agoIf only there was a way to make living within a city less important. There must be some way to move large numbers of people over "great distances" (50-100 miles) in a more commutable time.
- chadgeidel 10y agoNot sure if you are being sarcastic. The buyers driving up prices don't live in London. From the article: "Today, 60 percent of properties for sale in this part of London go to international buyers."
- maxxxxx 10y agoI think his point is that if commutes were quicker then regular people could move away from the city but still work there. Billionaires could still sell real estate to each other then without hurting lower incomes.
- chadgeidel 10y agoI like living in the city. I would prefer to live in one. Denver housing isn't so crazy yet that I can't afford to live here, but it's pretty close. I make a pretty damn good salary and would struggle finding a house that doesn't require significant rennovation in the city. Yes, I could move to suburbia - I could commute slightly further, etc, etc. I would prefer not to. I would prefer that my neighbors are people and not empty apartments used as safety-deposit boxes. (this is not the case in Denver, but sounds to be the case in London and other large cities). Edit: As an example - in my neighborhood there are $300k houses in pretty sorry shape that are purchased just for the land. They are destroyed and then a $500k new house is built on that land. This is what I'm facing. I could perhaps afford $300k (although I'm gunshy to purchase in such a volatile market), but it would require IMHO another $50k in renovation to make it "livable". I'm not talking about granite counter tops and high-end designer furniture, I'm talking about roof, insulation, water heater, bathroom fixtures, yard work, etc.
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- msrpotus 10y agoIf they aren't living there, why don't they just rent a lot of the houses out? I guess they don't need the money but that has always struck me as weird.
- wehadfun 10y agoSquatters seem like they would cause a problem. These places probably have staffs for the upkeep though.
- Symbiote 10y agoA colleague has a cousin that owns at least a couple of properties like this. The penthouse apartment was available at all times to impress visitors (e.g. my colleague), and included a chauffeur who acted as a tour guide. The owner used it himself occasionally, if he was visiting the city for a business trip.
- groby_b 10y agoBecause these houses are also safe retreats in case of upheaval in their home countries, and renters are occasionally hard to evict.
- mywittyname 10y agoI believe this is to not draw attention to the property. There was a Planet Money podcast a while ago about how high-end real estate is being used by foreigners to launder money. If the FBI catches wind, they have tools to seize the property and remunerate the proceeds. I'm guessing that renting the property means involving the IRS and potentially their foreign counterparts in the person's home country, both of which could increase the likelihood of getting caught.
- Symbiote 10y agoThis has nothing to do with the FBI or IRS; it's in London. The UK's territories include several actual tax havens (the Channel Islands, Isle of Man, Virgin Islands, Bermuda, Cayman etc). Many tens of thousands of houses are owned by corporations registered in an offshore tax haven. There's a map of British property registered in a tax haven: http://www.private-eye.co.uk/registry http://www.private-eye.co.uk/registry
- r00fus 10y agoAnd... this is what happens when you don't tax foreign cash infusions. For those who think we should get rid of taxes on cash repatriations - this is likely an outcome.
- latj 10y agoThis is what happens when Russian Oligarchs make undisclosed income and need to was their rubles into Euros and Dollars.
- valkea 10y agoForeign capital investment is great, so beneficial to the economy. The problem is with the housing market. Perverse subsidies, out of date zoning laws, and a lot of nimby based lobbying. Fix these things and I doubt anyone, including foreign investors, would be parking capital in property and just leaving it unused.
- r00fus 10y agoAnd that's why you use a tool like taxation to modify behavior to encourage positive outcomes.
- valkea 10y agoTaxation shouldn't be used as a tool to modify behavior. That's actually the exact opposite of good tax policy. Taxes should be broad based, with few exemptions, to raise the needed revenue while minimizing side effects. The distortions in housing markets are often partially caused by tax policy, and those areas should be addressed (tax deductions for mortgage interest for example). Other than that, it's best to actually deal with the root problem: outdated zoning laws.
- stuaxo 10y agoTaxation is a great tool for changing behaviour in many places.
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- rajeshp1986 10y agowe are not managing the land area efficiently as a result the major cities are getting overpopulated. I don't understand the point of paying millions for a 1/2 bedroom apartment in the middle of a city and then complain about city traffic and congestion.
- mtkd 10y agoI walked from Kings Cross to Marylebone at dusk recently - half way, I took the road up from the main Euston Road - walking through mostly residential - barely an apartment window with a light on - it's just money parked in property - the parks don't have kids playing in them any more The recent Vancouver tax changes have worked, I suspect/hope we'll start seeing that repeated in every city thats had it's life sucked out
- thruflo 10y agoYou were walking past student accommodation in the summer holidays.
- yodsanklai 10y agoI suspect it's a pretty common phenomenon. I recently visited Venice with a Venetian friend of mine. He mentioned that most of the apartments in the historical center were empty.
- emmelaich 10y agoYes, I rented a flat in Rome right near the Trevi fountain, in a beautiful old stone two storey building with a lovely courtyard. There would have been somewhere between 20 and 40 apartments there. There was a software / techical business of some sort in one corner, but I don't think I saw anyone else. (Thank you AirBNB)
- djhworld 10y agoMy mother used to live in Belgravia, in one of the buildings pictured in that article, when she was a young girl. ....well when I say lived there, my grandparents were caretakers so they lived in the basement. This was back in the 1960s mind, but even back then Belgravia was an extremely affluent area, with Lords, major industrialists etc living there.
- mtkd 10y ago> living there Most of the home owners referred in the article don't live there for more than a few weeks a year - if at all - there is a material inbalance I live in a village where people buy 2nd homes or they buy to retire - the locals slowly drift away to nearby towns to live in shared accommodation The life gets sucked out of the village over time - house prices go up - but the problem is deeper than that - the school closes, the public transport frequency reduces (nobody commutes), the local shop closes (as pensioners/visitors buy online for delivery), the pub closes ... the only infrastructure with any growth is the doctor surgeries - more of those are planned right across the county It's not a sustainable position - there are 2 families in a village with 80+ houses - the few businesses that are left have no pool of resource to hire from - we live next to a cow farmer with 400+ cattle - he has no help - in any normal world he wouldn't be working from 6am to nightfall like that
- sandworm101 10y agoI'm shocked that london, vancouver, SF and a few other cities are still functional. When working lawyers and doctors can no longer afford to live in a city, what actually happens? Are these now theme parks? Retirement villages for the uber-wealthy? Some (SF, seattle) have developed this strange mix of the very very rich and the homeless on the street. Others (Vancouver) see inverted traffic patterns as more professionals (carps etc) drive into residential neighborhoods to work on houses than residents drive out. Suburbs are now industrial zones, places where people go to work. Anyone who can afford to live in the suburb, in a detached house, can live on investments alone. I ran into a teacher from my old school last year. In my day, the school built doctors and lawyers. Everyone went to university. Now, the kids are so rich that they have no drive. None want to be doctors anymore. Doctors have to touch sick people. How do you motivate a kid who knows he has a guaranteed job at his parent's investment firm, that has trust portfolios that will support him forever?
- Tiktaalik 10y ago>Others (Vancouver) see inverted traffic patterns as more professionals (carps etc) drive into residential neighborhoods to work on houses than residents drive out. Suburbs are now industrial zones, places where people go to work. Anyone who can afford to live in the suburb, in a detached house, can live on investments alone. Do you have a source that more people are driving from the Vancouver core out than in? I wouldn't describe Vancouver this way. The region was planned to have many regional centres, so that there is no mass migration from the 'burbs into the downtown. Instead people live and work everywhere. There are more people working in downtown Vancouver than ever before, but traffic volumes in have been unchanged since the 60s. This is possible because of public transit and massive increases in the amount of residential density in downtown enabling people to walk to work.
- sandworm101 10y agoThey don\t commute from the core to the burbs. They move in from the hinterlands. People living in chilliwack, burnaby, Squamish and even further afield are commuting in. They are working on houses, on the industry that is every-rising house prices. Watch the lions gate bridge or the upper levels highway on the north shore. Watch what rush hour is these days. The 7:30-8:30 rush across the bridge is barely a thing. Now it's thousands of pickup trucks driving into the burbs at around 6:30, ready to fire up tools come 7am.
- microtherion 10y agoI'm reminded of the Rolling Stones' Play With Fire: Now she gets her kicks in Stepney not in Knightsbridge anymore.
- mnx 10y agoI wonder how much of the empty apartments are caused by laws which make it risky to rent, by making it hard to get rid of a tenant in a timely matter.
- msie 10y agoI cringe at some of the comments here where people have already written off cities like sf, vancouver, London, DC etc. Their entire perception of those places is through a couple sensationalist news pieces.
- 1_2__3 10y agoReally? Because I either live in or have spent a fair amount of time in those places and I promise you there's no overblown rhetoric involved here. This is what happens when a significant fraction of the world that previously was unable and unwilling to relocate suddenly begins spreading across the globe. Not only is what's going on real, it was easily predicted decades ago.
- bogomipz 10y agoIts been an interesting year for stories about how hot capital moves through the "globalized" world. It seems that there's been an uptick in these types of stories. Is there a connection with this uptick and the release of the Mossack Fonseca "Panama Papers" or is it simply getting harder and harder for obscene amounts of money to be discreet?
- optimuspaul 10y agoIt's absurd that private citizens can own land now. What was the crown thinking?
- deleted 10y ago[deleted]
- TheSpiceIsLife 10y agoCan anyone explain the purported benefits to society of allowing non-resident foreigners to own residential property? Who is this supposed to benefit? I mean, other than real estate agents, solicitors / conveyancer, and the initial citizen who sold the property. What prevents us (whoever 'us' is in your case) from banning foreign non-resident residential property ownership.
- aianus 10y ago> the initial citizen who sold the property These people are pensioners (or soon-to-be) who: a) vote in droves b) need to flip their houses at a huge profit to pay for their retirements because they don't have enough savings otherwise > Can anyone explain the purported benefits to society of allowing non-resident foreigners to own residential property? It's an easy and popular (amongst voters!) way to have foreigners pay for the care of your aging population. I'm not surprised at all there's little political will to stop it.
- grkvlt 10y agoBanning foreign non-residential ownership is insane! You apparently want to live in a world where people are not allowed to buy a holiday cottage in France? Or prevent people from buying a city pied-a-terre and a country house? If I have the money, and I want to purchase another house in another country or city, I should absolutely be able to do so, and I cannot imagine a world where this would ever not be the case... And, to answer your question, purchasing the house benefits me, the owner. I now have my own place to stay in another country or city, whenever I want to go there.
- TheSpiceIsLife 10y agoTrue, good point. I might conjecture that not-banning non-resident ownership is proving to be a bit wobbly too though. I suppose I should say something like: as we more in to a world where more and more people have the ability to access foreign residential property as an investment class we might need to rethink the rules around foreign non-resident property ownership for residential property, under some circumstances, perhaps, maybe.
- davidf18 10y agoThe reason that housing is increasing in cost is because of a market failure where politics is used to create housing scarcity, called "economic rents." In this case, the use of politics to create zoning laws that place artificial restrictions on housing density. As in any form of "economic rents", this benefits a special interest group -- in this case the landlords over the general population of rents and buyers of houses. In another case of politics creating scarcity was the artificial limit of 13,000 taxi medallions in NYC. Uber/Lyft fixed this scarcity by increasing the supply of taxi-like vehicles while lowering the cost of taking these vehicles. The price of a taxi medallion was $1.2 million prior to Uber/Lyft is now $700,000. With the political restriction on taxi medallions effectively eliminated, the "taxi landlords" lost out and the consumer gained. London, NYC, DC, Boston, LA, SD, SF and other cities all have these restrictive zoning laws that artificially limit density to increase housing costs. Economics Nobelest and NYTimes columnist Paul Krugman has discussed this. Harvard Economist and city expert Edward Glaeser has written extensively on this topic. Financial Times columnist (with a BS and MS in Economics from Oxford) addresses this topic in "The Undercover Economist." He discusses how in the 1930's London had Green Belt (park) surrounding the city installed which has resulted in increased housing prices for landlords. But bad zoning laws that limit housing density has also contributed. See: Edward Glaeser: Build Big Bill http://www.nydailynews.com/opinion/build-big-bill-article-1.1913739 http://www.nydailynews.com/opinion/build-big-bill-article-1.... Tim Harford: The Undercover Economist (2nd Ed). This book has sold over 1 million copies https://www.amazon.com/dp/0199926514/ https://www.amazon.com/dp/0199926514/ David Ricardo explained this in 1817. David Ricardo: On the Principles of Political Economy and Taxation http://www.econlib.org/library.. http://www.econlib.org/library... See Ch 2.3 - 2.5
- legulere 10y agoThe zoning story is pretty much bullshit and is told by developers that want to replace the buildings with even lower density, shittier but still pricier buildings. The Eixample district in Catalonia has one of the highest population densities in the western world without high-rises: https://en.wikipedia.org/wiki/Eixample https://en.wikipedia.org/wiki/Eixample Its population density is higher than the one in Manhattan and probably also any parts of the other cities you listed. It didn't achieve that by ditching zoning laws.
- ryandrake 10y agoThe problem is not specific to foreign investors. Local investors are also more than capable of buying up perfectly good homes and letting them sit there vacant and unused. Whether the people are foreign has nothing to do with it. The problem is that society tolerates this practice of investors swallowing up housing, pricing people out of the market, and then leaving perfectly those good homes vacant. Couldn't the solution be simply to enact a sufficiently punishing property tax rate on property not owner-occupied for more than 300 days of the year, so that these "investments" lose money? That would stop the practice, and maybe we'd see actual people/families moving in again.
- tmnvix 10y agoIt's interesting how this seems to play out politically. - Wealthy foreigners purchase property primarily as an investment. - Said property is left vacant or only used infrequently. - Locals that would otherwise have lived in these wealthy neighbourhoods start purchasing elsewhere. - A chain reaction occurs putting pressure on prices down through the market. - This is interpreted as a shortage of homes. - Poorer immigrants are blamed for the increased demand. I'm certainly not suggesting that this is sole reason for rising property prices (I think buy-to-let is probably a bigger issue), but I think that the simple assumption that most people make - i.e. that there is simply a shortage of homes is lazy and likely incorrect. There are two sides to the supply and demand equation and the typical focus on the supply side as the underlying issue is problematic. In my opinion, more attention should be given to the demand side of the equation. A speculative boom creates demand - not for homes but for 'investment' opportunities. There is a survey carried out each year in Melbourne (a city with similar property market problems to London and Vancouver) by an organisation called Prosper Australia. It is called the 'Speculative Vacancies Report' and is conducted using an interesting methodology. Typically, the vacancy rates you hear about in the media are sourced from the real estate industry and are collected by asking agencies what percentage of properties on their books are currently vacant. A typical response is something like 3%. The Prosper Australia report instead looks at water usage per property and shows much higher vacancy rates (close to 30% in some areas of Melbourne). Interestingly, higher vacancy rates correlate with areas that have higher price appreciation. This is not at all intuitive if you assume a simple relationship between supply of residences and demand for homes. It is more understandable if you consider that the demand side is in large part driven by people seeking speculative investment opportunities rather than homes. Given all of this, I think that the solution is not to be found in building more homes (likely to make any crash worse) but in making property less attractive as an investment. In many markets, this wouldn't mean punitive measures but instead removing existing incentives and possibly better regulation of lending so as to ensure banks and investors are left in no doubt that the risks they take when speculating (especially leveraged speculation) are their own responsibility and the taxpayer will not prop up the market for their benefit when prices stop rising (I say 'stop rising' and not 'fall' here because in a speculative boom that should be sufficient to lead to a fall if it lasts long enough).