What’s Dr Cheng’s prescription for Greenwich Peninsula?

Greenwich Peninsula, July 2013

Tucked away in the financial pages is news that’ll have a huge impact in Greenwich – Hong Kong investment firm Knight Dragon has taken sole control of the Greenwich Peninsula redevelopment project, promising it’ll speed up delivery of 10,000 new homes.

Knight Dragon, the vehicle of billionaire Dr Henry Cheng Kar-Shun, bought out its partner Quintain for £186m to take sole charge of Greenwich Peninsula Regeneration Limited, which is in charge of most of the land north of Greenwich Millennium Village.

It’s less than 18 months since Knight Dragon first arrived on the scene, buying out original partner Lend Lease. Since then we’ve seen a more aggressive stance towards development on the peninsula, which resulted in Greenwich Council agreeing to cut social housing levels at Peninsula Quays to zero, as well as cutting the proportion of affordable homes to just 21%.

Just what will happen next is anyone’s guess. But perhaps this move is why Greenwich Council recently acted to protect empty office space by North Greenwich station from being turned into flats.

Incidentally, I wonder what Dr Cheng thinks of the plummeting cable car usage figures? Here’s a wild bit of speculation – could he end up taking it off TfL’s hands?

53 comments

  1. Stewart

    Given the recent events with Convoys Wharf next door in Lewisham I’m very, very worried.

    Moribund project, new investor keen to build quickly, differences of opinion locally on what should be done – there are many parallels.

    Cross your fingers that what little input we currently have isn’t taken away completely.

  2. Franklin

    You forgot ‘billionaire Chinese property developer’ and ‘Boris met them on his recent visit’.

    Then again, there’s no need for Boris to call in the Peninsula development as the Council has already agreed to all of their demands…

  3. Stewart

    Hah, I was taking that “as read”.

    Yes, Greenwich have agreed to all of their *current* demands…

  4. Chris

    I told you about this lot at the time. I saw them operating when I lived in Hong Kong — they’re slick and know what they’re doing.
    Bearing in mind their modern strategy, it’s funny that the old word ‘steam-roller’ comes up mind.

  5. Maggy May

    Doomsday scenario, as a blogger on a previous topic said. This should scare the daylights out of us all. Far from sitting in a listed home in a conservation area (another blogger on this site who was glad to see all this coming) I live in the thick of it and can only see the quality of life for thousands of us sent straight down the toilet by increased air pollution and even more overcrowding as a ghetto comes to a location near us.I don’t fancy popping off before my time of lung disease and the stress of overcrowding plus all the noise from Heathrow and London City all set to increase dont bear thinking about.No proper extra infrastructure, and more retail will cut the riverside off from up the hill. Limited job prospects will not help. Dreadful future in sight.

  6. Richard

    Wo what do people propose? London’s population is increasing rapidly due to immigration and an associated baby boom (immigrants have more kids as do the upper middle classes but clearly the former is more important.) As someone who would class themselves as from the liberal right (I like the correct use of the term liberal as opposed to the modern US application of the term) I think both immigration and a rising birth rate are to be welcomed. The result of this will be greater population densities in our major urban areas. Is there another solution? Have a one child policy, forced relocation of parts of the population?

  7. Rational Plan

    People love a good moan don’t they. London’s population is booming, the previous Labour government brought this about (more by accident than design) but here we are with a million more people in the last decade or so and the same again coming up. What did you think was going to happen to all these low density industrial sites? Covered in terraced houses? Some nice Semi’s? Nope from now on it will be all be mid rises and high rise towers to squeeze whatever number of flats they can fit in on an empty site.

    The alternative is to bulldoze most of the terraced houses in inner London and replace it with blocks of flats.
    And that will be politically unacceptable. So high rises it is then.

    As for this site, Quintain were not exactly setting the World on fire with the pace of redevelopment were they. The great recession has not been good to builders so it might be understandable. But this deal allows them to accelerate their development in Wembley (where there is considerably less foreign investor interest) and cash out of their prime riverside site here.

    At least this developer seems interest in building rather than just flipping it to the next investor. There is a chance the Peninsula might get built out in less than 20 years, maybe closer to 10 or 15 years.

  8. Franklin

    Richard

    This is what I would propose: stamp duty of 40% for non-EU domiciled buyers, including natural and legal persons and offshore trusts; and a capital gains tax of 40% for the same.

    This would dampen aggregate demand sufficiently to allow house price increases to stabilise, but domestic and EU demand would remain sufficient to continue to incentivise the construction of new homes. It would also rationalise government grants for the construction of affordable housing, which is currently a massive subsidy to non-EU investors.

    Londoners need homes in London. Investors from the Middle and Far East do not.

  9. Chris

    As Franklin points out the problem here is that everything is skewed towards the buy-to-let investor. The market is totally distorted by these people.

    Note the amount of social housing in the development — none.

  10. Richard

    Franklin

    I imagine the stamp duty idea would be unworkable and would probably just push these investors into other UK assets anyway. The capital gains idea I would agree with since housing is distorted by low taxes. Again taxing foreigners and not domestic investors would be tricky but I would levy capital gains on all properties at a rate euqal to labour taxes. The fact still remains that London (and the Uk in general) needs more houses. Whether people rent hem from Foreigners or buy them outright does not change this fact.

  11. Omar

    It was only a matter of time before someone with deep pockets saw the peninsula for the potential goldmine it is. Same story for convoys. Where else are you going to find huge river frontages close to central London, on the doorstep of canary wharf, with good transport connections, and somewhere with the draw of ‘old greenwich’ in walking distance. Look at how every inch of land around Lewisham dlr has been turned into flats and scale that up 100 times – amazing it hasn’t happened sooner and that UK developers and investors were too short sighted to go for it. As someone above said, I doubt we’ll ever see houses for anyone other than multi millionaires built inside zone 2 ever again.

    Unfortunately I also have little doubt the council is far too weak and incompetent to exert the right level of control and influence to make sure it is done right, that transport and other infrastructure can cope, and that the developments will include enough amenity provision etc.

  12. Franklin

    Richard

    Three points: first, many foreign investors aren’t renting their properties, they are leaving them unoccupied. Definitive stats are hard to come by, but a recent report for the Mayor concluded that two-thirds of all new build units in prime London are purchased by foreign investors. One-third of London-wide new builds are bought by foreign investors, one-third by domestic buy-to-let investors and only one-third by owner occupiers. Of the one-third bought by foreign investors, as much as *half* are left unoccupied. That’s one-sixth of the total supply of new houses left empty, and purchased solely because of their expected capital appreciation.

    I would strongly support foreign investment in other UK assets, but the distortionary impact of foreign investment in the residential property market has become completely unsustainable.

    Second, effective intervention in the housing market is absolutely dependent on differential stamp duty and capital gains taxes on EU (including British) and non-EU buyers. Otherwise you will have to significantly increase the tax burden on domestic buyers, which will dampen the domestic demand which tends to be more buy-to-let than buy-to-leave-empty and thus supplies the rental market. In other words, domestic and EU investors are preferable, from a public goods perspective, to non-EU investors.

    Third, many new builds are heavily subsidised by central government – Knight Dragon are receiving £50 million in affordable housing subsidies for the Peninsula developments – and it is neither fair nor efficient for government to subsidise socially divisive and highly profitable residential real estate development in London.

  13. Richard

    Franklin

    The report for the Mayor was not based on hard evidence. Even it were true then it suggests that capital gains taxes are too low on property. (Actually I think that taxes are too high elsewhere but thats besides the point). My point is that to discriminate against investor types based on where they are domiciled is legally tricky and also has its own externalities. Basically the UK would probably see an outflow of investment across the board on the premise that the UK government may extend this tax treatment to other asset classes most notably commercial property.

    I would suggest that domestic buyers of property are not suppliers of public goods, ask the tax payers who bailed out Northern Rock.

    I don’t think the government should subsidise any markets and certainly not the housing market as they currently do either implicitly or explicitly.

    All this is interesting but doesnt answer the central question for Greenwich and London. The population is increasing rapidly. If we choose to remain living here we will have to accept much higher population densities. I don’t see how you get around that basic fact. Sure we can demand better architectural standards (although this is hugely subjective much like housing economics) but ultimately 10s of 1000s of people will move to the area.

  14. Shivanee

    Uhm, I don’t think the peninsula is in any danger of over-crowding anytime soon! This latest development is good news as the plan was always to build upwards all over the area. London is (and always has been) a global city so foreign investors is nothing new. Well, I suppose it just used to be the other way around in the days of the Empire?

    Many people, such as myself, prefer apartment living so are actually keen on more supply for more choice. Having done old and new, I would say the Victorian terraced (carved up) house feels much more like a rabbit hutch. Especially when you can’t swing a cat in the living room etc…or bathroom, or bedroom etc. Far from desolate, the Peninsula has nearly everything with key infrastructure already in place (fast tube line that cuts through major business and tourist areas, the medical center and school, shops, huge amount of green space) ….. though a gym would make it perfect. Any news on the proposed GLL gym at Mitre Passage?

  15. John Norman

    Richard
    So you want such densities that its impossible to use a car on the streets near here – no more taking my children on trips to the countryside around London.
    So more public transport? What happens (as it almost is now) when all the buses and trains are full, and cant run any more frequently? More Thames crossings? Knock down more houses/flats for more train tracks?
    How about schools? We’ll need to build more of those – is there space? Or have classes over 40 children.
    How about water? Flood more of the south east so these new properties can flush their toilets.
    How about sewage treatment for all these people?
    So eventually – a one child policy will happen. Having such high density is not healthy or sustainable.
    Why not let other parts of the country enjoy the prosperity of London? Companies do not need to be located here any more. And there are cities in the UK that could do with a boost.

    As for the Peninsula, I hope they build it well. I hope we get some lovely buildings rather than the copy/paste buildings we get recently. I hope it is well planned, with enough schools for all the children there. I hope we get a foot (or road) bridge across the Thames to Canary Wharf as I am sure a vast amount of people who will work in Canary Wharf. And in the Peninsula, it’s the right place to build high (not like Lovells Wharf). And I hope there is enough green space for people to enjoy.
    And I hope the flats are offered to the UK before overseas investors get their chance.

  16. Franklin

    Richard

    The report for the Mayor (http://www.london.gov.uk/sites/default/files/Barriers%20to%20Housing%20Delivery.pdf) was based on:

    “Interviews with the firms actually building schemes of 20+ private sale homes in London; Interviews with the firms in control of permissions of 20+ private sale homes in London; Interviews with the following 26 firms:

    — Aitch Group
    — Ballymore Properties
    — Bellway Homes (North London)
    — Bellway Homes (Thames Gateway)
    — Bouygues (UK)
    — Department for Communities and Local Government
    — Durkan Group
    — Fairview New Homes
    — First Base
    — Galliard Homes
    — Galliford Try / Linden
    — Kier Homes
    — Land Securities
    — London & Quadrant
    — London Councils
    — London Square
    — MacDonald Egan
    — Mount Anvil
    — One Housing Group
    — Poplar HARCA
    — Quintain Estates
    — Redrow London
    — Shanly Homes
    — Sellar
    — Telford Homes
    — Willmott Dixon Regeneration”

    As such, it’s pretty definitive.

    Obviously, I agree that capital gains tax on secondary and buy-to-let homes are too low. The imposition of a 40% stamp duty for non-EU-domiciles is also necessary to further reduce the return horizon for residential property investments.

    You claim that “to discriminate against investor types based on where they are domiciled is legally tricky and also has its own externalities.”

    Both claims are false. On the first, the vast majority of jurisdictions discriminate against non-dom buyers on the residential property market, with no legal complications. Intervention to ensure the sustainability of the residential property market is the norm, rather than an exception.

    On the second, you contradict yourself: first you claim that intervention in the residential property market would have a diversionary effect to other UK asset classes. Now you claim that it would undermine investor confidence in the entire market. The latter claim is clearly spurious: if the intervention were targeted to ensure a sustainable UK housing market, investors would not flee for fear of your hypothetical Chavez-style nationalisation of all assets.

    Domestic buyers of residential buy-to-let properties are suppliers of public goods in the sense that they rent their properties out (rather than leaving them empty) and their rental and resale profits remain in the UK economy. This does not apply to speculative foreign investors looking for a solid return with marginal risk.

    Finally, of course more people are moving to London and Greenwich. The Mayor’s office estimates a population increase in Greenwich of 65,000 to 2020, the Borough puts it at 55,000.

    This strengthens, rather than undermines, the case for sustainable, equitable and long-term solutions to the housing crisis. What we are presented with by Knight Dragon is none of these, and it is well past time that Greenwich Council and the GLA wake up to the fact that they risk creating socioeconomic divisions of an apocalyptic scale if they continue to pander to Chinese and Qatari billionaires who want to build enormous, gated and segregated ‘luxury’ developments in the heart of our city.

  17. James

    Slowly, Slowly catch e monkey or through the back door.
    Are these the investors for Boris Airport?
    Are these the investors to build a city on the land if Heathrow was to go?
    Theses are investors with big bucks and the money talks!

  18. Richard

    Franklin

    The survey by its own admission isnt based on hard facts as no one has actually collated any hard data, for a start there are no real estate firms replying to the survey or indeed any residential investment vehicles so trying to form an opinion about the secondary market seems quite a feat.

    Its an obvious point that if the government intervenes in one asset via the tax system it will affect behaviours in other asset classes. Foreigners buy UK assets in part for access to our legal system. (Why else are lots of PIIG nationals lifting London flats?). If the UK government suddenly started targeting foreign nationals in one asset class would the allure of UK assets in general remain? I doubt it. I also find it amusing that you think the state could intervene to provide a sustainable UK housing market.

    I disagree that the solution is a high rate of capital gains taxes on 2nd properties, I would levy it on all properties and reduce taxes on labour. Why should I have an untaxed 7 figure captal gain on my house yet someone who earns 25k pays a huge marginal rate of tax? (or why should a pensioner sit on a massive capital gain which is untaxed whilst those paying high marginal taxes on their labour fund their healthcare?)

    Domestic buy to let investors are in no way providing a public good (in any case arent public goods supposed to be non excludable and non rivalrous?)- if anyone is it is the bank which finaces the development. Moreover foreigners are hardly betting on an asset with marginal risk, if they are then the domestic investor base are idiots, which I doubt.

    Again all this is vaguely interesting but you do not address the central point that we need more and more development as the population increases. The existing population and the NIMBY residents’ societies can bleat all they want about conservation areas and existing vistas but unless we limit population growth (which would be a huge mistake IMHO) then we need lots more flats.

  19. John Norman

    We dont need to limit population growth (yet), just a limit on number of people per square mile, or square foot of property per mile
    People will find other places to live. Which in the long run will be better for most.
    It seems like a tiny minority want build at any cost, rather than sustainable or optimum build.

    Heh – Nimby, quite amusing when that term is used. First letters of a phrase, there are lots of worse things to be called. Everyone should strive to improve their area and challenge anything that is detrimental. Then its down to the processes in place to decide whether the benefit to the whole is better served than the people who are against it. With often a sensible change in plan can make all parties happy. The term nimby is usually deployed by people who dont have things happening in their back yard. But put a couple of mobile phone antennas near their properties and….

  20. Richard

    John

    Limiting building in the centre or inner suburbs will just ensure they become ghettos of the rich as prices will rise as supply falls. I know price capping is popular at the moment but in the real world we know it doesnt work.

  21. Mark

    Franklin – where do you get the statistic that of those new build flats bought by foreign investors “as much as *half* are left unoccupied”? I can’t see it in the Mayor’s report.

    In any case, “as much as *half*” is rather meaningless statistic as it gives no indication of the lower band of the estimate. I would be amazed if the actual figure is anywhere near 50%.

    What the Mayor’s report does make clear is that these developments wouldn’t go ahead were it not for overseas investment. This means more supply for those of us who rent which ultimately means we pay less than we would do otherwise.

  22. Ken

    So the Chinese are coming! I worked in Zambia and saw first handwhat happened there. It was not nice. They wanted mineral rights and promised big infrastructure the Zambians are too poor to do. They were delivered fine. But they used Chinese workers and local jobs didn’t happen. No locals were trained up to look aftere things so when the Chinese left with the mineral contracts the big projects fell apart. And these are the people who will build our nuclear power stations. Private finance wrecked the NHS so now we have the bright idea of doing the same with housing and energy supplies.

  23. Franklin

    Mark

    I don’t know where I read that figure – if it’s not in the report for the Mayor it might have been in GLA member Darren Johnson’s recent report on housing?

    But are you surprised that the report for the Mayor argues that these developments wouldn’t have gone ahead if it weren’t for foreign investors? The report was designed to make the case for clearing administrative barriers to new housing starts – so of course it comes to that conclusion.

    I think removing local control (as in the case of Convoys Wharf) is a disastrous step, which runs exactly contrary to the Localism Act, and will lead to imbalanced and ultimately unsustainable communities. And it won’t deliver as significant increase in owner occupation or rented property as its advocates claim.

    And of course increased supply doesn’t always address the problem of excess demand, as demand is elastic.

  24. Maggy May

    The voice of common sense, Franklin. Once localism disagrees with what is wanted from above, then localism is put in its place – nowhere

  25. fromthemurkydepths

    To solve the housing shortage councils should be permitted to borrow and build again. Big developers who land bank should pay costs if they sit on it for years. 14 years to get to this stage after the Dome was complete and land cleaned is ridiculous. If some developers fall because they recklessly bought land at the peak of a boom, or because they can now only finance developing by selling at such high prices they are unaffordable to 90% of the local population then so be it. Land prices will fall and new developers and institutional investors like pension funds can then buy land and develop, sell and rent more cheaply along with councils utilising their land as well as buying and building.

    Councils built up to 150k per year from the 1920s to 1980 and 90s, along with private builders building around 150k a year. Councils were then banned but private developers didn’t increase building to compensate so since the 1990s just 150k per year is the norm. Prices have shot up and are more unaffordable than ever when looking at prices to wages.

  26. Stewart

    fromthemurkydepths – I couldn’t agree more. Quintain have made a £34.6m profit purely from doing nothing. Much of the peninsula has been lying empty for over a decade, even after the clearance and decontamination costs were paid for from the public purse.

    Indeed, decontamination costs were amongst the reasons given for variations in planning consent to increase density and reduce affordable housing [9.22-9.24 at http://committees.greenwich.gov.uk/documents/s28441/011%20-%20Peninsula%2011%20Plots%20-%20Deed%20of%20Variation%20-%20Report.pdf%5D :-

    “The percentage of affordable housing that is to be secured across the 11 plots is approximately 21%. Normally, where such levels of affordable housing grant are provided on a site the Council would expect to secure in the order of 35% affordable housing. However, the Greenwich Peninsula site is subject to certain unique and exceptional circumstances that mitigate against such an outcome. These principally relate to the cost to the Government of remediating the site and providing the new infrastructure such as roads,parkland, riverside walk and river wall improvements between 1997 and 2004 and the terms under which the Government then sold the Greenwich Peninsula land to GPRL for redevelopment.

    “The National Audit Office (NAO) report into the regeneration of Greenwich Peninsula published in 2008 noted that English Partnerships (EP – now known as the HCA) (on behalf of the Government) had spent £225 million on decontamination and remediation work and invested in provision of facilities, transport links and infrastructure. It also recorded the fact that in 2004 a deal was completed between EP and Meridian Delta Ltd (MDL) to develop the site over a 20 year period. The projected financial return to EP from the land deal was £216.4 million. In 2005 the NAO concluded that this deal offered an integrated solution for the regeneration of the Greenwich Peninsula and offered the Government a sensible exit strategy from the Dome.

    “It is the unique recent history of the Greenwich Peninsula in terms of its decontamination, new infrastructure and staging of the Millennium Exhibition in 2000 that makes this proposal an exceptional case in terms of financial viability. Whilst all of this work has undoubtedly accelerated the pace of regeneration on the Peninsula it required significant financial investment by the Government, which reasonably enough given the level of scrutiny attached to the deal and the fact that public funds were used, it has subsequently sought to recoup. It is the need for the Government to recoup as much of its investment as possible that is a major factor in the overall financial viability of the scheme and means that despite the availability of grant more affordable housing cannot be provided. However the affordable rented housing being provided is at target rents level in perpetuity. It should be noted that the GLA (which took over the ownership of the land from EP in2012) has agreed to take a reduced guaranteed land payment in respect of the 11 plots in order to allow the current proposals to come forward.”

    In effect, a nice deal for Quintain. They manage to vary planning consent due to the costs incurred before they bought the land and then sell it on for a nice tidy profit after consent is granted. In the meantime, London suffers from a lack of housing, and in the longer term, Greenwich suffers from a lack of affordable housing.

    It’s worth noting that the GLA affordable housing grant (referenced earlier in the same document) which was in danger of being lost was awarded by the GLA’s “Homes for London” board.

    Who are they? Well, one of them is the man who makes most of the decisions in our borough, our very own “Dear Leader”, Chris Roberts: http://www.london.gov.uk/moderngov/mgCommitteeDetails.aspx?ID=262

  27. sitdowncomedian (@sitdowncomedian)

    Having worked on the Peninsula for the last three years I feel more than qualified to add my penny’s worth. There is no post office, dry cleaners, healthy food options or decent coffee. Everything is geared to the O2 visitors, there is no long term offer to people who live and work here. As a result there is a strange mix of commuters, workers and tourists passing through.

    The opening of Eva’s Bakery was a great alternative to the chains, and proper home cooked food is served there. I really hope her business succeeds.

    If Knight Dragon rejuvenate the Peninsula that can only be a good thing.

  28. Franklin

    fromthemurkydepths

    I agree with most of your suggestions – except the suggestion that Councils should be empowered to build social housing.

    Councils in general, and Greenwich Council in particular, aren’t good at managing large capital projects or in maintaining their existing capital stock.

    More fundamentally, there’s an inescapable conflict of interest in your elected representatives also being your landlord.

    Instead, we need to move back to requirements to build a higher proportion of affordable and social rented housing. Greenwich has gone in exactly the opposite direction in the recent past, lowering the affordability requirement significantly.

    Residential property developers will scream bloody murder and lobby hard to prevent it, but the profit margins on new-build London residential property are so large that I seriously doubt this would hold up the delivery of new homes.

    We also need to return to a realistic assessment of ‘affordability’, which is in reality much lower than currently set.

    sitdowncomedian

    No one is disputing that the Peninsula needs to be built out. What some locals are concerned about is HOW it is built out. Unless the Council and GLA take a radically different stance, what Knight Dragon will deliver isn’t going to be any better for people who work on the Peninsula that what’s (not) there now, as you won’t be able to get into the luxury gated communities and private schools and medical clinics. What was originally designed to be public space is rapidly being effectively fully privatised.

  29. Richard

    Franklin

    Your argument seems to be based on some notion that the clearing level for London property is somehow artificially high and that this is caused by a deliberate attempt by builders to force prices up? Your solution would be to intervene in the market to cap (some) prices and dictate what sort of supply is built. This would be completely sub optimal. Supply is indeed the problem but it is the quantity which is the issue. We simply need to build more flats/houses/units to satisfy increased demand. Contrary to what you suggested demand for houses is extremely inelastic since it is determined by demograhpics to suggest otherwise in frankly nonsense. Increase supply and prices will fall.

    Finally contributors here do seem to be suggesting that building in high denstities on the Peninsula and elsewhere isnt a great idea due to its impact on quality of life issues and not just objecting because the developer is (shock horror) trying to maximise their profits.

  30. Franklin

    Richard

    You and I simply have different priorities: you have said that you “live in a listed building within a conservation area and would quite happily lose both designations so homeowners could expand their properties more easily.”

    My priority is for London, and the UK more generally, to have sustainable, well-balanced, equitable and mixed communities which reflect and respect the past. I think mixed communities are what make London great. Your wet dream of total deregulation of the housing market would result in both the destruction of the historic fabric of London and the further ghettoisation of large swathes of the city, which is not sustainable and certainly isn’t equitable.

    Are house builders profiteering? In the last tax year Berkeley Homes – a ‘strategic partner’ of Greenwich Council currently building both the Kidbrooke Estate and Royal Arsenal – made a post-tax profit of £210 million with a margin of 28%. Galliard Homes, now completing the New Capital Quay development, made net profits of £83.5 million with a margin of 13.1% – and yet pleaded to the Council that the luxury development at New Capital Quay was so financially unviable that they could not afford to implement their Section 106 obligation to build a footbridge across the creek, unless they were granted permission for an additional 22 units (bringing it up to a nice, round 1,000). In the meantime, London house prices grew by 14% y/y in October.

    So, yes, I think builders are profiteering on a massive scale, while at the same time extorting concessions from local authorities – to provide additional grants and/or lower affordable housing requirements – by empty threats to abandon consented schemes. Councils, which are generally staffed and led by morons, do not have the capacity to challenge the developers’ claims and so cave in to these pressures.

    When a market is as open as the London housing market is today, demand is totally elastic to price. And there is absolutely no reason that already heavily-subsidised new developments – such as at the Olympics Park or Elephant & Castle – should be marketed FIRST to Far Eastern buyers. Their profit-taking on these development schemes amounts to a highly regressive direct transfer from UK taxpayers to investors from abroad.

  31. Rational Plan

    Franklin, London is an international trading city, the idea that it would be better off by severely curtailing foreign investment is laughable. I’ve also read a report on foreign investors, which I think was by Savills which looked at where each group of nationals were buying in London and what type of properties etc. The main point is while Foreign investors are dominating new luxury builds, they actually only make only a small part of the overall house buying market, considering it is dominated by existing built properties. I think it was roughly 5%of total transactions. The main driver of house price rises recently has been domestic demand within London, most of whom shun new build for period properties.

    the interestingt thing was that I think 85% of investment properties were actually let out, the remainder either used as second homes or for relatives (students studying in London) and a fairly small percentage actually completely unused.

    The current market certainly is not deregulated, Planning is a drawn long term process in the UK. Getting planning permission is not easy and in many areas has restrictions on when construction can actually start.

    So the Landbanking issue figures are highly skewed. For example examine any local plan in the Home counties. At the start of each period landowners submit applications for which bit’s of land can be built on. A council will also try an have a goal of how many new houses it will allow to be built each year and will often only designate them to be released after certain dates.

    Most developers only have four to five years worth of sites in onwership. Many larger estates take that long or longer to build out anyway.

    If we got rid of most planning controls. London would not suddenly depopulate, even if we could build a million new houses around the edges of London the demand would still be to be as near to their work as they could afford.

    It took a World war and government planning to move 2 million people out of London plus the banning of new factories and most large scale office buildings in the centre of Town to depopulate London last time.

  32. Franklin

    Rational Plan

    I didn’t say London would be better off by severely curtailing foreign investment. I said that curtailing non-EU investment in the residential property market would dampen aggregate demand and slow house price growth.

    We’re talking about new build residential property – see the topic of this post – the rationale for the relaxation of planning constraints on which has been the argument that London needs new homes at any cost. As I said before, the report for the Mayor found that two-thirds of all new build units in prime London and one-third London-wide are purchased by foreign investors.

    I never said the current market was deregulated, I said that Richard wants deregulation.

    Tell Quintain that landbanking is a myth, and I think they’ll show you the £35 million they just banked for sitting on their Peninsula holding for the past seven years.

    I have no idea what you are talking about with regard to depopulation, which no one has suggested or recommended, and which deregulation certainly wouldn’t cause.

    Do you know what the current London housing market sounds like? ‘Tick, tick, tick…’

  33. Richard

    Franklin

    “My priority is for London”. No it really isn’t. You seek to defend the vested interests of a tinty subsection of wealthy current residents. Thats whats local societies do. Fair play to them they do it well. The problem is London is a global city and 100s of thousands of people will come and live here over the next few decades. The only way to solve a housing shortage is via the market. Price controls and central planning have never ever worked and indeed have caused the current situation, ask the hundreds of millions of people who have been lifted out of poverty over the last 15 years.

    Demand for housing has never and will ever be elastic. Even a GSCE economics pupil would be able to demonstrate that this is nonsense.

  34. Franklin

    Richard

    You are a twat. Demand for any asset class is price-elastic if markets are fully open.

    As you know, what I said is “My priority is for London, and the UK more generally, to have sustainable, well-balanced, equitable and mixed communities which reflect and respect the past. ”

    You clearly have a problem with that, but you are rowing against a century-old tide. The vast majority of the world’s great cities exert some form of housing market controls. In New York City, for example, 65% of rented accommodation is rent-controlled or rent-stabilised.

    What I don’t understand is this: why do you live in your listed house in a conservation area in Greenwich? Why not shift to Canary Wharf, or better Dubai, where you won’t be bothered by meddling amenity societies trying to preserve and enhance the areas in which they live?

    As has happened several times before, I’m now rather bored of discussing these issues with you, and I’m sure you need to return to your close study of Atlas Shrugged, so I will leave it here. But I doubt you will.

  35. Richard

    Franklin you are a moron if you think demand for housing is elastic, demand is fixed by the population which is a function of demographics. My point is that supply is very very inelastic which is the market malfunction, a malfunction caused by the planning process. This misunderstanding seems to underpin your musing on how to solve a housing crisis. The fact that you resort to calling people names when you cannot win an argument is telling.

    Also Berkeley Homes is a private company with a profit margin of 9% (was 0% 3 years ago) as opposed to the Berkeley Group who’s figures you cite.

    I lived in New York for several years. To use this city as an example of a normally functioning housing market is also quite funny. They have all the same issues that London does, again high prices due to limited supply.

  36. Jim Tyler

    Strong feeling all round obviously judging by the language.

    Just to stick my bit in, all sides may want to know that the financial viability card is being played a lot. When a council pushes for a high proportion of social and affordable units the developers cry is that unless that goes down they wont be able to raise the finance at all and nothing will be built.
    I bow to no man in my belief that Greenwich council are an ineffectual bunch but I do have a bit of sympathy here. They are driven by targets from above to deliver housing and it is obvious that when Boris wants something he will muscle in to get it and take away any local voice. Catch 22 situation. Make the best of a bad job by allowing vile schemes with the locals howling in protest or let Boris take over and get the same vile scheme anyway.

  37. Maggy May

    If Richard feels like doing a house swap for the greater good then he can have my pollution levels any day he likes. Listed buldings in conservation areas can protect you from a lot of nasty things and give a slanted view on what the majority live with for lack of choice.

  38. Joe

    It’s a shame the argument is getting so heated. The developers would love this – infighting amongst the locals lets them divide and rule! And how come Boris has so much power?!

    There has to be some limit set regarding big developers buying up huge areas and selling them on at vast prices to people who don’t actually need them. All the while this activity is pushing ordinary people who actually live in the area further out into the margins while their new overlords look down at them from their luxury towers – well, they do when they are actually using their flats. I think there needs to be new legislation to limit the number of homes that can be sold abroad for the luxury market, when people are struggling to find homes in their own country. I heard that Japan introduced something like this (a limit, that is), once they realised it was getting out of hand with overseas investors buying up huge chunks of land exclusively for their own profits.

  39. Franklin

    “Foreign money is certainly inflating the price of London housing.”

    “Foreign competition may well price some British people out of flats to live in.”

    So what we need is more foreign investors.

    Hmmm…

  40. fromthemurkydepths

    Joe – Most of the Asian nations whose citizens are the main purchasers have restrictions on foreign owenership or tax levels to foreigners buying there to mitigate the effects – Hong Kong, Singapore, China etc.

    In the UK foreign buyers are not only on parity – they actually have greater benefits! They don’t have to pay capital gains tax when selling whereas UK buyers do. No other nation places foreign buyers above it’s own citizens. Until April this year they could register the properties to a company not an individual and avoid stamp duty, and avoid paying council taxes as councils couldn’t track down who actually owned them – usually a shell company in a tax haven like the Bahamas. I’m not sure if that problem has been solved by changes in April.

    There is something seriously wrong with a country and its housing when building is at 100 year lows and the vast majority of the tiny amount being built is only affordable to investors thousands of miles away. This isn’t just a credit crunch issue either – housebuilding was very low from the 90s to 2008 compared to most of the 20th century, and that was at a time with credit easily available.

  41. therealdecoy

    Richard, you say,
    “The only way to solve a housing shortage is via the market. Price controls and central planning have never ever worked and indeed have caused the current situation, ask the hundreds of millions of people who have been lifted out of poverty over the last 15 years.

    Demand for housing has never and will ever be elastic. Even a GSCE economics pupil would be able to demonstrate that this is nonsense.”

    Once upon a time I lived on the Downham estate in my Gran’ma’s council house. She had solved her housing crisis by sitting in the council office for a fortnight, with her 3 children, until they allocated her a decent home. A lot of people, perhaps not ‘hundreds of millions’ though, used similar methods after the war to great effect. Later, when my mum was only offered a high-rise flat after waiting a few years, we moved to a ‘new town’ GLC development. This was ok. We had a garden and a sense of community, which, funnily enough, is something even the most hideous of council estates managed to build up after a generation or so. Many reputable academic studies have confirmed the common-sense notion that the problems with high-rise estates were largely that they were high-rise, not that they were pubicly owned. The problems really came when the ‘right to buy’ caused massive changes, robbing communities of our common assets, particularly the nicer council homes (where my Gran’ma used to live is now known as ‘where the fash live’ by the way) and setting people against each other according to income differences.

    When I grew up it was normal for most people to live in a council place. There were just enough of these to go around before market interventions, including the PR onslaught, moved the goalposts. Might I suggest that the market is currently being manipulated to assure that though some homes are built the majority will remain inaccessible to most in need, precisely in order to preserve the artificial inflation of profit margins on new developments, and fuel a climate of ‘I’m all right jack’ political prejudice.

    I was lucky enough to study Economics at O level. Sadly, in most secondary schools now this option has been superceeded by Business Studies.

    Ashleigh

  42. Shivanee

    The real issue is that some people hold very narrow outdated concepts of high density homes. Apartment in high rise = ’60s council blocks. Unmaintained, crime and poverty-ridden etc. Whilst house = Victorian = garden = ‘must be decent because everyone middle class likes them.’

    Anyway, why does house + garden = community. Sorry, but too many London suburban streets have zero sense of community. Rubbish everywhere – including in front gardens, high streets full of betting and kebab shops…..

    So is high density private home ownership really a bad thing?

    A property agent told me that investors (domestic BTL and foreign) prefer one beds as they have higher yields. As long as there are 2, 3 and 4 beds (like as proposed for Greenwich Square), there shouldn’t be too much problem filling any development with residents – particularly with the current Help to Buy scheme etc. The population of singles/couples is rising so does everyone need or want a house? High quality private apartments are the future, especially for global cities like London.

    I really question the current popular belief that rent controls, caps and greater proportions of social tenancies would really eradicate or even manage London’s housing demand. How would the failures of the ’60s not be replicated? Does RBG want/need another Thamesmead?

    I also suspect that many of the opponents of high density private home ownership would turn blue if stacks of ‘affordable’ rent controlled housing were to be built next to their pretty Victorian manors.

  43. Richard

    Therealdecoy “When I grew up it was normal for most people to live in a council place”

    That is simply untrue. The % of households renting a house from a ‘social’ provider peaked at around 31% in the 1980s having risen steadily throughout the 20th century. At the same time the % of households who were owner occupiers increased throughout the same time period. A minority of households have always lived in council homes. We don’t know the counterfactual but it seems pretty clear that as society has become increasingly wealthy so households have chosen to buy their own homes. People have expressed a clear preference for a market solution over a state provided alternative continually for around a century?

  44. Ken

    Murkydepths and Maggy. Buy to let is one big problem. Owning several properties that are hardly used is another. Both affect London and both need looking at. It would be very interesting to know where all the wannabe Greenwich MPs stand with these big ones. Do they have views on the preferential treatment overseas btl have had? Are any of them in the property business themselves? However legal and above board it all is I would feel very uncomfortable with a landlord MP in an area of massive housing development. Would a local MP have a constituency home and a family home elsewhere that could end up being flipped? Don’t think I’d like that either

  45. Joe Thorne

    If any of the candidates has got a public profile it should be easy enough to find out. The GLA has a published list of members’s interests online and that includes property.

  46. therealdecoy

    I didn’t say we had a garden therefore a sense of community – I said we had a garden and a sense of community. And I didn’t say most households were council rents – I said it was normal for most people to live in a council place.
    This is true – the private renters tended to be single and they and owner occupiers had smaller households on average. I grew up in the 60s and 70s by the way.

    So Richard, you say – ‘As society has become increasingly wealthy so households have chosen to buy their own homes. People have expressed a clear preference for a market solution over a state provided alternative continually for around a century?’

    I say people have been bribed and cajoled and sometimes threatened to appropriate or squander our common wealth – which our grandparents fought bloody hard for – apparently in order to sit on their desk jobs and think themselves up in the world, despite being chained to the debt train.

    Ashleigh

  47. Jim Tyler

    I looked up the GLA website and yes one potential candidate has 3 properties and the partner has an interest in 2. No idea what the other boys and girls. I have nothing for or against any of them but Ken has a point.

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