This is just not London, it's happening in almost every major city. There is a massive real estate investment movement in progress where wealthy and giant investing funds are dumping bucket loads of money to buy up properties in popular areas. These then gets put back on market with extra-ordinary rents (typically 5% annual of purchase price). I think the hope is that even if property stays without renters for even half a year, its returns when combined with appreciation would exceed other "safe" investments. It's not unnatural anymore to go in high demand areas of city in night just to find empty apartments all over. I shudder to imagine how next real estate crash would look like...
If you walk through Knightsbridge in the evening, at a time when people in well-adjusted cities might be having dinner with their families and friends, or at least watching TV with their kids, you will see a wall of black, punctuated by the odd square of illumination.
> These then gets put back on market with extra-ordinary rents (typically 5% annual of purchase price).
Why do you think this rent is extraordinary? Unless you meant that it is extraordinary as a result of extraordinary purchase prices. As a proportion of purchase prices, these rentals are nothing special. Rental prices will lie within a relatively narrow band near the cost of maintaining a mortgage for the simple reason that if they get much higher, people can finance more property purchases and hope to gain on price growth, and if they get much lower, a substantial proportion of investors lose the ability to leverage and so the returns won't be attractive.
> If you walk through Knightsbridge in the evening, at a time when people in well-adjusted cities might be having dinner with their families and friends, or at least watching TV with their kids, you will see a wall of black, punctuated by the odd square of illumination.
Try walking around the wealthiest area of any city, and the patterns will be very different from "normal" areas: Flats will be larger, and someone at home does not necessarily mean the building will look very lit; more people have second homes, or travel a lot, or work late, and so an inhabited flat may still have people at home more rarely. You can easily find rich areas that look almost black even when most houses are occupied.
I don't know if Knightsbridge is an aberration, but I do know London in general does not in fact have a lot of empty properties in proportion to its size/population. I don't have a source handy, but the last time I looked at the stats it was small. More importantly, the vast majority was empty for other reasons than uninterested absentee landlords.
> with extra-ordinary rents (typically 5% annual of purchase price
5% is not extra-ordinary, 5% is low. 10% is average and more than that is high.
After paying for property tax and maintenance, anything under 10% is not really worth it unless rent is just a side effect and you are really hoping for appreciation.
What many people don't get is this is global asset inflation due to the enormous amounts of money created by central banks worldwide. The term "currency war" has been used to describe it and like any war the poor and working classes bear the burden.
My solution is to protect my family as much as possible while trying to generate enough wealth entrepreneurialy to have a seat at the table.
Are there penalties for invading those kinds of homes in the UK?
Where I used to live (a city of ~100K in Israel) there are probably 500-1000 properties on and around the marina owned by foreign nationals that are conspicuously empty for 9 months of the year, I considered squatting in one of those but if I'm discovered I'd be liable for the something like 3 times the rent for the period I lived there.
Presumably if the penalty for squatting unattended apartments were lower, the owners might be more motivated to find occupants.
Couldn't this be solved by passing city ordinances, and state taxes on vacant properties, non-primary houses, and un-rented apartment spaces?
Without any way to counter balance out speculation, land hording, and gentrification/displacement of urban areas, syndicates of real-estate investors would just buy up everything in sight, turn it into luxury condos/lofts and set the price at a rate determined to be some minimum of %75 of the target populations' average income..
The next real estate crash will be very interesting. It's not gonna be the whatever estate saddled with an unpayable mortgage, or banks saddled with a a ton of unknown/questionable mortgages... correct me if I'm wrong, but it will be a lot of rich people, especially foreigners who will get hosed.
My office near Columbus Circle in NYC looks directly at One57, the 75-story condo tower whose apartments are setting price records up to $100 million (and which will shortly be dwarfed by newer taller pricier towers).
No matter how late I work, not one window lights up.
It might take a crash for London to become livable again. There is also probably a threshold where London stops being attractive to money compared to the competition from other locations, because it has priced out the service economy.
The author went to Eton and then Cambridge, moving to London for the first time after university. In the process, he himself pushed property prices up, and directly contributed to gentrification.
Obviously, when he moved there, that's when London was at its best. Since then, these upstarts and their money, moving there, pricing out the real Londoners... etc.
Not really. London shrank until 1988 and only this year passed the previous historical population peak of 1939 as the UK economy has become completely concentrated in the city.
The problem is exacerbated by the UK's lack of building. Thatcher stopped local authorities constructing homes (then half the total) and even private building has declined as its so hard to build. The result has been a huge wealth transfer to those who owned property.
Need to tax unoccupancy. If an entity is preventing people from living in the city, they should be paying more than those contributing to the well being of the city.
We tried to tax underoccupancy in state provided accommodation, ie, if you lived in state housing, with empty rooms, you'd have a reduced benefits payout.
It was an absolute nightmare response.
https://en.wikipedia.org/wiki/Under-occupancy_penalty
Why taxes? Rich idiots buying just for resale would not be impeded in any way.
An effective way might be forced auctioning off if the asset was left unoccupied for more than 9 months (to allow "holiday flats"). In case the asset sells for more than the price it was acquired, the previous owner gets only this price and any surplus ends up as taxes; in case the asset has less worth, the owner only gets the auction proceeds.
Why not cap rents and property valuation? It seems Berlin has done the former [1]. But it's not the first city to do so, Vienna is known to have a large public rent market to counter balance private development greed.
In Spain, Andalucia (an area in the south of Spain), advocated during the political campaign to rent out thousands of flats owned by private banks, which in turn were bailed out with public money. Also Barcelona is going to implement measures to prevent the city to become an empty touristic resort with no much life beyond tourist apartments and hotels.
Hawaii got bought up by the Japanese when they were flying high and then they crashed to earth. I remember playing golf once in a beautiful country club that was now public. Glorious gold everywhere in the clubhouse and no one would ever use it again. Eventually things will crash and all that golden London will die.
London is not creating the prices of property, the people are. They will be prepared to pay as much as they think living in London is worth. If eventually all the cool stuff is driven out by the high prices, prices will fall accordingly. Or rather, presumably there will be an equilibrium of prices vs coolness.
It kind of sucks, but what would actually be a better system? That people get assigned places to live by lottery, so if you happen to live in a cool place on the cheap, you were simply lucky? It sounds good on the surface because you only have the people living there in your mind. You forget about all the other people who never get a chance of living there. Why is it fair if some randomly selected people get to live in nice places and others don't?
I am not convinced that the market approach is not preferable. After all, those people PAY for the privilege to live in a cool place. If they have the money, presumably they should have delivered something good to the world in exchange.
And, hello, welcome to overpopulation. The number of nice places to live is finite. Even if we can cram ever more and more people into the world (by building skyscrapers or whatever), it doesn't seem obvious to me that we can provide nice places for everyone. For example, the length of shorelines is finite (glossing over fractal issues), so if your idea of living in a nice place is to live by the sea, there are only so many people who can have that privilege.
"It kind of sucks, but what would actually be a better system? That people get assigned places to live by lottery, so if you happen to live in a cool place on the cheap, you were simply lucky? It sounds good on the surface because you only have the people living there in your mind. You forget about all the other people who never get a chance of living there. Why is it fair if some randomly selected people get to live in nice places and others don't?"
We actually have had something not completely dissimilar to this since the 1980s. Anyone who lives in state housing for at least a minimum period of time is able to buy that home at a subsidized price. As local authorities are banned from using this money to build more state housing, this leads to long term shortages in state housing which is one of the causes of the problems we are facing now. (Source: https://en.wikipedia.org/wiki/Right_to_Buy)
Nobody is expecting to get a cheap home in Kensington or the equivalent super-expensive part of whatever city you are from. But it is not just the "cool", "nice" places that are becoming unaffordable. And the problem is that people are not paying to live in these homes. People are paying to use them as big, shiny piggy banks in the sky that happen to offer a better rate of return than other investments. Poor people who actually live in London and use London businesses generally contribute more to London's culture than rich people who don't.
What would be preferable is more housing and better infrastructure, because the current living cost is toxic to the economy. The cost of living is still high in the suburbs where support workers (cleaners, plumbers, etc.) can afford to live, but they pushed outer regions y/y while the commuting time and cost is higher. We will end up being uncompetitive just because we have to pay extra for the employees living cost. This can be acceptable for the financial and tech sector, but what will a locksmith or street food owner do? And this happens just because there is no city planning and more housing. These prices are artificially high.
Sure, since it's happening on this side of the pond, too. "The provinces" have their own messes, like Toronto and Vancouver and Montreal (to some extent).
Same in "the colonies," like: San Francisco, Seattle, Portland, Austin, the Bronx and Brooklyn (ways you know the real estate market has gone bonkers: people are buying in Manhattan because it's cheaper than Brooklyn).
Vancouver, Seattle, and Portland are getting the exact same double-whammy as London: very popular places to live along with very popular places for foreign investment.
[+] [-] sytelus|10 years ago|reply
If you walk through Knightsbridge in the evening, at a time when people in well-adjusted cities might be having dinner with their families and friends, or at least watching TV with their kids, you will see a wall of black, punctuated by the odd square of illumination.
[+] [-] vidarh|10 years ago|reply
Why do you think this rent is extraordinary? Unless you meant that it is extraordinary as a result of extraordinary purchase prices. As a proportion of purchase prices, these rentals are nothing special. Rental prices will lie within a relatively narrow band near the cost of maintaining a mortgage for the simple reason that if they get much higher, people can finance more property purchases and hope to gain on price growth, and if they get much lower, a substantial proportion of investors lose the ability to leverage and so the returns won't be attractive.
> If you walk through Knightsbridge in the evening, at a time when people in well-adjusted cities might be having dinner with their families and friends, or at least watching TV with their kids, you will see a wall of black, punctuated by the odd square of illumination.
Try walking around the wealthiest area of any city, and the patterns will be very different from "normal" areas: Flats will be larger, and someone at home does not necessarily mean the building will look very lit; more people have second homes, or travel a lot, or work late, and so an inhabited flat may still have people at home more rarely. You can easily find rich areas that look almost black even when most houses are occupied.
I don't know if Knightsbridge is an aberration, but I do know London in general does not in fact have a lot of empty properties in proportion to its size/population. I don't have a source handy, but the last time I looked at the stats it was small. More importantly, the vast majority was empty for other reasons than uninterested absentee landlords.
[+] [-] gammarator|10 years ago|reply
Agreed. Here, for example, is an excellent article about these effects in Portland, Oregon: http://www.invw.org/cash
[+] [-] ars|10 years ago|reply
5% is not extra-ordinary, 5% is low. 10% is average and more than that is high.
After paying for property tax and maintenance, anything under 10% is not really worth it unless rent is just a side effect and you are really hoping for appreciation.
[+] [-] icu|10 years ago|reply
My solution is to protect my family as much as possible while trying to generate enough wealth entrepreneurialy to have a seat at the table.
[+] [-] pliny|10 years ago|reply
Presumably if the penalty for squatting unattended apartments were lower, the owners might be more motivated to find occupants.
[+] [-] nosuchthing|10 years ago|reply
Without any way to counter balance out speculation, land hording, and gentrification/displacement of urban areas, syndicates of real-estate investors would just buy up everything in sight, turn it into luxury condos/lofts and set the price at a rate determined to be some minimum of %75 of the target populations' average income..
[+] [-] cynicalkane|10 years ago|reply
[+] [-] meatysnapper|10 years ago|reply
[+] [-] nicwolff|10 years ago|reply
No matter how late I work, not one window lights up.
[+] [-] dalore|10 years ago|reply
[+] [-] elektromekatron|10 years ago|reply
[+] [-] peteretep|10 years ago|reply
Obviously, when he moved there, that's when London was at its best. Since then, these upstarts and their money, moving there, pricing out the real Londoners... etc.
It has always been thus.
[+] [-] laurencerowe|10 years ago|reply
The problem is exacerbated by the UK's lack of building. Thatcher stopped local authorities constructing homes (then half the total) and even private building has declined as its so hard to build. The result has been a huge wealth transfer to those who owned property.
[+] [-] crdoconnor|10 years ago|reply
Not nearly as much as those Russian oligarchs and Arab oil barons did.
[+] [-] 001sky|10 years ago|reply
[+] [-] d4rkph1b3r|10 years ago|reply
[+] [-] abstractbeliefs|10 years ago|reply
[+] [-] mschuster91|10 years ago|reply
An effective way might be forced auctioning off if the asset was left unoccupied for more than 9 months (to allow "holiday flats"). In case the asset sells for more than the price it was acquired, the previous owner gets only this price and any surplus ends up as taxes; in case the asset has less worth, the owner only gets the auction proceeds.
[+] [-] escanda|10 years ago|reply
In Spain, Andalucia (an area in the south of Spain), advocated during the political campaign to rent out thousands of flats owned by private banks, which in turn were bailed out with public money. Also Barcelona is going to implement measures to prevent the city to become an empty touristic resort with no much life beyond tourist apartments and hotels.
[1] http://www.theguardian.com/world/2015/jun/01/rent-cap-legisl...
[+] [-] someone7x|10 years ago|reply
[+] [-] coldcode|10 years ago|reply
[+] [-] facepalm|10 years ago|reply
It kind of sucks, but what would actually be a better system? That people get assigned places to live by lottery, so if you happen to live in a cool place on the cheap, you were simply lucky? It sounds good on the surface because you only have the people living there in your mind. You forget about all the other people who never get a chance of living there. Why is it fair if some randomly selected people get to live in nice places and others don't?
I am not convinced that the market approach is not preferable. After all, those people PAY for the privilege to live in a cool place. If they have the money, presumably they should have delivered something good to the world in exchange.
And, hello, welcome to overpopulation. The number of nice places to live is finite. Even if we can cram ever more and more people into the world (by building skyscrapers or whatever), it doesn't seem obvious to me that we can provide nice places for everyone. For example, the length of shorelines is finite (glossing over fractal issues), so if your idea of living in a nice place is to live by the sea, there are only so many people who can have that privilege.
[+] [-] toupeetape|10 years ago|reply
We actually have had something not completely dissimilar to this since the 1980s. Anyone who lives in state housing for at least a minimum period of time is able to buy that home at a subsidized price. As local authorities are banned from using this money to build more state housing, this leads to long term shortages in state housing which is one of the causes of the problems we are facing now. (Source: https://en.wikipedia.org/wiki/Right_to_Buy)
Nobody is expecting to get a cheap home in Kensington or the equivalent super-expensive part of whatever city you are from. But it is not just the "cool", "nice" places that are becoming unaffordable. And the problem is that people are not paying to live in these homes. People are paying to use them as big, shiny piggy banks in the sky that happen to offer a better rate of return than other investments. Poor people who actually live in London and use London businesses generally contribute more to London's culture than rich people who don't.
[+] [-] aries1980|10 years ago|reply
[+] [-] l33tbro|10 years ago|reply
https://i-d.vice.com/en_gb/article/london-its-over-and-its-n...
[+] [-] vermooten|10 years ago|reply
[+] [-] techsupporter|10 years ago|reply
Same in "the colonies," like: San Francisco, Seattle, Portland, Austin, the Bronx and Brooklyn (ways you know the real estate market has gone bonkers: people are buying in Manhattan because it's cheaper than Brooklyn).
Vancouver, Seattle, and Portland are getting the exact same double-whammy as London: very popular places to live along with very popular places for foreign investment.
Schadenfreude doesn't help anybody, really.
[+] [-] KaiserPro|10 years ago|reply
Anything that is within 3 hours of central london is now 50-200% more valuable than it should be.
[+] [-] soniah|10 years ago|reply
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