Have foreigners made London unaffordable? Mayor wants to find out

A couple viewing advertisements of properties for sale in an estate agency's window in London. Mayor Sadiq Khan has announced the launch of an unprecedented inquiry into foreign home ownership and "dirty money" that is allegedly being used to buy pro
A couple viewing advertisements of properties for sale in an estate agency's window in London. Mayor Sadiq Khan has announced the launch of an unprecedented inquiry into foreign home ownership and "dirty money" that is allegedly being used to buy property in the capital.PHOTO: REUTERS

LONDON • London's property crisis is best seen at night, when entire streets in central London are in the dark. Welcome to one of the world's most expensive places.

Except that hardly anyone will be there to welcome you.

Nearly half of all properties in central London are owned by foreigners. Most of the owners do not live in their properties, but use them as second homes or investment properties. Foreign ownership has driven up property prices immensely and has made life in central districts almost impossible for many poorer Londoners who feel the fallout most severely.

Fixing the city's housing crisis was one of London Mayor Sadiq Khan's election promises during his campaign this summer. Now, in an interview with The Guardian, he has announced the launch of an unprecedented inquiry into foreign home ownership and "dirty money" that is allegedly being used to buy property in the British capital.

The project will be watched closely in other world capitals facing similar issues and has the potential to become a model for how to address the matter.

"It's clear we need to better understand the different roles that overseas money plays in London's housing market, the scale of what's going on and what action we can take to support development and help Londoners find a home," said Mr Khan.

More so than in other countries, the capital city is of particular importance to many Brits. The best jobs are here and the accumulation of world-class universities is stunning.

But younger professionals and university graduates see themselves increasingly faced with uncomfortable choices: Either move away to a smaller city with fewer opportunities, or launch a career in London with the financial support of parents. For those with lower-income parents, there is often only one choice.

Non-governmental organisation Sutton Trust recently concluded that the capital's housing crisis was causing widening rifts within British society. In a report, it described how "bright, young people - especially those from disadvantaged backgrounds - are being priced out of the city's housing market, despite London being the top place in the country for law, medicine, media and finance jobs".

Some think that Mr Khan's inquiry into foreign home ownership is a farce, though.

"He is covering up the failures of the authorities by blaming the impact on foreign home owners," said Ms Naomi Heaton, chief executive of real estate advising company London Central Portfolio.

From 2001 to last year, London's population increased by 12 per cent, but the number of homes built has lagged behind. Many of London's eight million inhabitants have even had difficulty finding property far away from the city centre, where foreign owners have bought up much of the available properties.

"British buyers and international customers are interested in totally different types of properties," Ms Heaton said, blaming the local authorities for permitting real estate owners to build luxury homes in cheaper suburbs instead of favouring construction of large-scale affordable housing projects there.

"It is not the interest among overseas buyers in acquiring some of the most expensive homes in London that is at the core of the problem, but rather the government's failure to build affordable homes."

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A version of this article appeared in the print edition of The Straits Times on October 03, 2016, with the headline 'Have foreigners made London unaffordable? Mayor wants to find out'. Print Edition | Subscribe