5 ms·

3 families are leaving London and that makes a trend? Comparing property prices in London to Williamsburg or SF and it looks like a similar trajectory to me. Ci

by casca 13y ago

3 families are leaving London and that makes a trend? Comparing property prices in London to Williamsburg or SF and it looks like a similar trajectory to me. Cities are expensive because space is constrained (artificially in many cases) and lots of people want to live there. The author makes note of the low "property taxes" in London which is just spurious. In the US, property taxes are often used as a way to pay for many local and state government services for a number of historical reasons. This is often the only income that some states collect. In the UK, council tax is to pay for a much smaller set of services. A £5m house does not generate 10x the garbage of a £500k house. It's a cheap shot that tries to make a false point for US readers. It's true that the current state of the global economy has meant that fearful foreigners have brought their money and bought property, but this tends to be at the very high end of the market which shouldn't be affecting the middle class that he's referring to. Greater demand by many people wanting to live in one of the world's great cities might.

crdoconnor 13y ago
>Cities are expensive because space is constrained (artificially in many cases) and lots of people want to live there. That has ALWAYS been true, so cannot possibly account for today's prices. The last decade's price increases have been driven by the lack of other perceived safe haven investments. Treasuries/Gilts pay below inflation now. That money found a new home: property in tier one global cities. >The author makes note of the low "property taxes" in London which is just spurious. Oh come on. Would high taxes on a house make it a more or less attractive investment? >A £5m house does not generate 10x the garbage of a £500k house. THIS is spurious. Irrespective of whether that's true or not (it's not: a £5m house probably takes up more valuable land, which is made valuable by everything surrounding it - transportation, shops, parks, etc.), it still doesn't change the fact that low taxes make property a much more attractive investment. >It's true that the current state of the global economy has meant that fearful foreigners have brought their money and bought property It's foreigners who have checked out every other safe investment and seen how pathetically they pay. Seen the interest rate on Gilts? Some are also (rightly) fearful of their home governments (Russians, Chinese, Arabs), and want to park their money in a country where the government is unlikely to decide to confiscate it one day. >this tends to be at the very high end of the market which shouldn't be affecting the middle class that he's referring to. Except: A) It does affect the middle classes too. Prices filter down. Everybody who was buying at the high end of the market and gets priced out buys something lower down, which prices them out and so on. Land used on expensive properties is not available for the middle classes. B) It's not just the very high end of the market. London property is being shopped all around the world, from Singapore to Hong Kong to the US as a safe investment for upper middle classes. I could show you a hundred glossy foreign magazines advertising property which is "close" to some tube station on the Piccadilly or Northern line 13-15 stops from the center.
- mjn 13y ago
  Copenhagen has traditionally (a bit less recently) fought this kind of effect by restricting absentee investment ownership through several mechanisms. For one, a large percentage of property in the city has ownership that requires residency in Denmark, usually because it's structured as a residents' cooperative. Another significant portion is owned by nonprofit organizations that will only rent the property to residents. And beyond that, much rental property has renter-friendly laws with a view towards ownership, where if you have been renting the property to someone for three years, you are required to sell it to them if they want to buy. The general idea is to reduce the impact of absentee landlords/investors on the local housing market, by trying to restrict it to only people who physically live in Copenhagen. The high taxes help make this work as well, by trapping would-be cheats in a situation where they can't have it both ways. Do they want to claim that they live in Denmark? Then their property is fine, but they are liable for Danish income taxes. Do they want to claim that they live elsewhere? Then they avoid Danish income taxes, but must sell their property.
  - rwmj 13y ago
    Why don't the real owners employ proxy Danish residents to act as "owners"?
    - xyzzy123 13y ago
      I suppose that if the Danish residents hold title it might be hard to prevent them from disposing of the property.
  - MrBuddyCasino 13y ago
    Very interesting! The more I know about scandinavian countries, there more impressed I am.
  - roel_v 13y ago
    How is that even legal? It's a direct violation of several European and human rights laws. Are these laws being challenged in court?
ljf 13y ago
Exactly the same thoughts here. Also he's writing about what has pretty much always happened, people move to London when they are young. They get a good career, meet a partner, have children then after trying to live on for a while they move out to the 'sticks' for a better life. This has been happening for years, only the very rich at the top can afford to live in London for good (while keeping a 2nd home in the country) and those on the lower end of the scale who either never owned, or who can not move to the country as they have service or manual jobs. There are always a few exceptions, but this is a total non story, I wonder if they wrote another one a few years ago called 'the great wedding and baby boom - how now I've hit 30 I've found all my friends are getting married and having kids, they never did this before it must be part of a wider trend...'
- pja 13y ago
  Although you're of course correct that people have always followed this pattern, I think you're missing the fact that there have been genuine shifts in the London property market that are driving this trend to an unusual extreme. The proportion of foreign buyers of London property has nearly doubled, from 23% in 2005 to 38% in 2012 according to Savilles & I'd guess that it's going to be higher this year. Many of those buyers are looking not for income but simply for places to park capital so they don't rent out the properties which remain empty (this is especially true of Chinese buyers, apparently for cultural reasons). Consequently those people who are living in London (or would like to) are competing over a smaller pool of properties. The net effect on rents and house prices is exactly what you'd expect: both are going up sharply.
  - makomk 13y ago
    Yeah. Last I heard, there were new-build tower blocks full of apartments that sold out rapidly but have remained almost entirely unoccupied because they were bought by foreigners as a safe way of storing their wealth. (Normally this would cause problems with squatters but the government changed the law to make it a criminal offense to squat in empty buildings and allow the police to forcibly remove them. They were helped with this by a sob story in the Daily Mail about someone who'd gone on holiday and found his house full of squatters; what the Daily Mail didn't mention is that it was a buy to let property and he didn't actually live there.)
omonra 13y ago
Have you seen this article that describes who's buying London real estate now? http://www.vanityfair.com/society/2013/04/mysterious-residents-one-hyde-park-london?currentPage=all http://www.vanityfair.com/society/2013/04/mysterious-residen...
welly 13y ago
I've just moved to London, so I'm equalising Bibi and Andy or Tarquin and Pandora at least.

by casca 13y ago

crdoconnor 13y ago

>Cities are expensive because space is constrained (artificially in many cases) and lots of people want to live there. That has ALWAYS been true, so cannot possibly account for today's prices. The last decade's price increases have been driven by the lack of other perceived safe haven investments. Treasuries/Gilts pay below inflation now. That money found a new home: property in tier one global cities. >The author makes note of the low "property taxes" in London which is just spurious. Oh come on. Would high taxes on a house make it a more or less attractive investment? >A £5m house does not generate 10x the garbage of a £500k house. THIS is spurious. Irrespective of whether that's true or not (it's not: a £5m house probably takes up more valuable land, which is made valuable by everything surrounding it - transportation, shops, parks, etc.), it still doesn't change the fact that low taxes make property a much more attractive investment. >It's true that the current state of the global economy has meant that fearful foreigners have brought their money and bought property It's foreigners who have checked out every other safe investment and seen how pathetically they pay. Seen the interest rate on Gilts? Some are also (rightly) fearful of their home governments (Russians, Chinese, Arabs), and want to park their money in a country where the government is unlikely to decide to confiscate it one day. >this tends to be at the very high end of the market which shouldn't be affecting the middle class that he's referring to. Except: A) It does affect the middle classes too. Prices filter down. Everybody who was buying at the high end of the market and gets priced out buys something lower down, which prices them out and so on. Land used on expensive properties is not available for the middle classes. B) It's not just the very high end of the market. London property is being shopped all around the world, from Singapore to Hong Kong to the US as a safe investment for upper middle classes. I could show you a hundred glossy foreign magazines advertising property which is "close" to some tube station on the Piccadilly or Northern line 13-15 stops from the center.

mjn 13y ago
Copenhagen has traditionally (a bit less recently) fought this kind of effect by restricting absentee investment ownership through several mechanisms. For one, a large percentage of property in the city has ownership that requires residency in Denmark, usually because it's structured as a residents' cooperative. Another significant portion is owned by nonprofit organizations that will only rent the property to residents. And beyond that, much rental property has renter-friendly laws with a view towards ownership, where if you have been renting the property to someone for three years, you are required to sell it to them if they want to buy. The general idea is to reduce the impact of absentee landlords/investors on the local housing market, by trying to restrict it to only people who physically live in Copenhagen. The high taxes help make this work as well, by trapping would-be cheats in a situation where they can't have it both ways. Do they want to claim that they live in Denmark? Then their property is fine, but they are liable for Danish income taxes. Do they want to claim that they live elsewhere? Then they avoid Danish income taxes, but must sell their property.
- rwmj 13y ago
  Why don't the real owners employ proxy Danish residents to act as "owners"?
  - xyzzy123 13y ago
    I suppose that if the Danish residents hold title it might be hard to prevent them from disposing of the property.
- MrBuddyCasino 13y ago
  Very interesting! The more I know about scandinavian countries, there more impressed I am.
- roel_v 13y ago
  How is that even legal? It's a direct violation of several European and human rights laws. Are these laws being challenged in court?

ljf 13y ago

Exactly the same thoughts here. Also he's writing about what has pretty much always happened, people move to London when they are young. They get a good career, meet a partner, have children then after trying to live on for a while they move out to the 'sticks' for a better life. This has been happening for years, only the very rich at the top can afford to live in London for good (while keeping a 2nd home in the country) and those on the lower end of the scale who either never owned, or who can not move to the country as they have service or manual jobs. There are always a few exceptions, but this is a total non story, I wonder if they wrote another one a few years ago called 'the great wedding and baby boom - how now I've hit 30 I've found all my friends are getting married and having kids, they never did this before it must be part of a wider trend...'

pja 13y ago
Although you're of course correct that people have always followed this pattern, I think you're missing the fact that there have been genuine shifts in the London property market that are driving this trend to an unusual extreme. The proportion of foreign buyers of London property has nearly doubled, from 23% in 2005 to 38% in 2012 according to Savilles & I'd guess that it's going to be higher this year. Many of those buyers are looking not for income but simply for places to park capital so they don't rent out the properties which remain empty (this is especially true of Chinese buyers, apparently for cultural reasons). Consequently those people who are living in London (or would like to) are competing over a smaller pool of properties. The net effect on rents and house prices is exactly what you'd expect: both are going up sharply.
- makomk 13y ago
  Yeah. Last I heard, there were new-build tower blocks full of apartments that sold out rapidly but have remained almost entirely unoccupied because they were bought by foreigners as a safe way of storing their wealth. (Normally this would cause problems with squatters but the government changed the law to make it a criminal offense to squat in empty buildings and allow the police to forcibly remove them. They were helped with this by a sob story in the Daily Mail about someone who'd gone on holiday and found his house full of squatters; what the Daily Mail didn't mention is that it was a buy to let property and he didn't actually live there.)

omonra 13y ago

Have you seen this article that describes who's buying London real estate now? http://www.vanityfair.com/society/2013/04/mysterious-residents-one-hyde-park-london?currentPage=all http://www.vanityfair.com/society/2013/04/mysterious-residen...

welly 13y ago

I've just moved to London, so I'm equalising Bibi and Andy or Tarquin and Pandora at least.