London - Boom, Bubble and Bust

Figures obtained by the Guardian reveal sites for close to 30,000 homes are owned by just 10 investors in Hong Kong, China, Malaysia, Australia, Singapore and Sweden. The growth of Asian investment in residential property is such that developers from mainland China, Hong Kong, Singapore and Malaysia are behind plans for more than 21,000 homes in central London, according to data provided by Molior. From 2012 to 2014 Asian investment in all kinds of central London property doubled to outstrip UK investment, accounting for more than a quarter of the £21bn that went into the area, according to Savills. Prime sites for almost 6m sq ft of office space are owned by a further 10 firms based in Kuwait, Qatar, Canada, the US, Japan, Slovakia and Germany. Since January 59% of investment in the capitals’s office and shops has come from abroad with Asian investors dominating foreign purchases, according to data from Savills.

The foreign owners include the Usaha Tegas Group, owned by Malaysian billionaire Ananda Krishnan, which has submitted plans for 104 luxury homes on the site of the former St John’s Wood barracks, with apartments expected to sell for up to £5m each and seven-bedroom stone-clad detached mansions around landscaped gardens that will go for more.

Knight Dragon, a company owned by Hong Kong billionaire Henry Cheng Kar-shun, has consent to build 10,000 homes on the Greenwich peninsula, including three-bedroom apartments, with interiors designed by Conran & Partners, costing above £800,000. Richard Margree, its chief executive, said it was too early to say at what level affordable rents would be set. Knight Dragon’s plans for the Greenwich peninsula have been described as “social cleansing” by local people, providing just 25% affordable housing, when the borough’s policy specifies 38% and they will be relegated to the out of sight back-end of the site.

Another Hong Kong-listed conglomerate Hutchison Whampoa is behind plans for 3,500 homes. The Convoys Wharf development originally refused by Lewisham council  but passed by the mayor after the Hong Kong developer wrote a furious letter complaining of “unreasonable and unwarranted” demands – will have just 15% affordable housing.

Investors from China and an Abu Dhabi sovereign wealth fund are also reported to be interested in bidding for the Hyde Park barracks site which is likely to be sold by the Ministry of Defence for about £650m. It is expected to be transformed into “super-prime” housing.

In the capital’s financial districts, the Saudi Arabian sovereign wealth fund that owns the stalled 63-storey Pinnacle skyscraper project in the City with Arab Investment Limited is planning to sell the site undeveloped. Axa, the French insurance giant, has been reported as a possible buyer.

The Qatar Investment Authority has been in negotiation to potentially break the British record for the amount paid for a single building, by paying £1.1bn for the Norman Foster-designed HSBC tower at Canary Wharf.

Ikea, the Swedish furniture giant, is developing a 1,200-home scheme next to the Olympic Park in east London.

A Chinese state-owned property company, Greenland Group, is a co-investor in Wandsworth to convert the old Ram brewery into 660 flats and is also investing around £600m in a site at Canary Wharf with consent for 700 apartments, including the tallest residential skyscraper in Europe at 242 metres. Greenland’s chairman, Zhang Yuliang, has cited “the stable return on assets, high-quality assets and sound market liquidity” as reasons for investing in London.

Joan Ruddock, MP for Lewisham Deptford said “This is global capitalism and we have to find a way around it. There have to be some tougher controls about the balance between housing for the more well off and affordable housing, and I mean genuinely affordable. The capital will not be sustainable unless people in the public services can afford to live here. We are pricing them out.”

“There is a perception these major residential developments backed by international money, particularly in super-high towers, only serve a market for overseas investors who want to buy a luxury flat in a skyscraper to treat as a safety deposit box,” said Nicky Gavron, the former deputy mayor of London and chair of the London assembly’s planning committee. “Such properties often become buy-to-leave investments and don’t meet the needs of Londoners. London is in the midst of a housing crisis – what we need is mixed-income housing where people actually live.”

Royal Wharf, a development of 3,400 homes by Singapore developer Oxley Holdings in east London, was launched in Beijing, Shanghai, Kuwait, Abu Dhabi, Dubai, Hong Kong, Singapore and London. In November the London mayor, Boris Johnson, led a trade delegation to Malaysia, Singapore and Indonesia during which he promoted investment in housing schemes in the capital by government and private investors. Malaysia’s housing minister, Datuk Rahman Dahlan, was chosen to launch the latest phase of homes at the revamped Battersea Power Station and a new open space was named Malaysia Square. Johnson insists foreign investment is needed specifically for regeneration schemes. Johnson has been publicly supportive of foreign investment and last year struck a deal for ABP, a privately owned Chinese company run by Xu Weiping, to be the developer behind the £1bn transformation of the Royal Albert Dock. It will include 850 homes and is intended as a gateway for Asian and Chinese business seeking to establish headquarters in Europe.

Tim Craine, director of Molior, a residential property research consultancy, confirmed the influx of Asian money was causing a surge in the number of homes being built but added: “They are being built at the wrong price. A one-bed flat for £1m is not going to solve anyone’s housing crisis.”

So at last we finally have acknowledgement that the housing shortage problem is not one that has been caused by migrant workers but foreign investors (although there are plenty of UK property speculators doing deals, as well.) British borders are too open to the capitalist class.

It is explained that these land developments are simply tycoons’ projects to park what is called  “flight capital.” A safe-deposit box reserve to protect their assets. Many will be Potemkin villages, flimsy facades behind which the lights may never even be switched on, mostly sold off-plan in Asia.  Not so much buy-to-let as buy-to-leave. Many will create empty swaths of zombie town, their retail units left untenanted, their private cinemas unused. Having paid over the odds for the plots, developers must squeeze out the value of every inch. And given the Faustian pact of the UK planning system, most local authorities will be happy to let them do so in order to cream off a fatter bounty of “planning gain” (when land value rises after the granting of planning permission). Socialists recognize the illogical irrationality of capitalism at work. Let's buy houses and not use them because they are a good investment, but they are only a good investment because everyone wants to buy them as an investment, and therefore increasing value and prices forever. People that do it just take the risk that there is some other idiot out there who will buy it for a higher price, or another person who thinks there is another idiot that they could sell it to for an even higher price etc. Capitalism will call it growth. Until the Pyramid scheme bubble bursts, that is. When the reformists tried to encourage “affordable” housing, all the developers did was refuse to build until they got rid of it such restrictive planning rules, citing that they made developments economically inviable i.e. - we lose the extra profit we make if we have to build homes plebs can afford.

The London’s Mayor Office, the City of London businessmen, and Westminster political mandarins are all servants of global capital. Lets call a spade a spade , these are not 'investors' they are parasites, self-serving profiteers pure and simple.