
Even the Rich Are Being Priced Out of Central London - rch
http://www.citylab.com/housing/2016/09/the-latest-victims-of-london-gentrification-are-the-rich/498536/
======
mtkd
I walked from Kings Cross to Marylebone at dusk recently - half way, I took
the road up from the main Euston Road - walking through mostly residential -
barely an apartment window with a light on - it's just money parked in
property - the parks don't have kids playing in them any more

The recent Vancouver tax changes have worked, I suspect/hope we'll start
seeing that repeated in every city thats had it's life sucked out

~~~
yodsanklai
I suspect it's a pretty common phenomenon. I recently visited Venice with a
Venetian friend of mine. He mentioned that most of the apartments in the
historical center were empty.

~~~
emmelaich
Yes, I rented a flat in Rome right near the Trevi fountain, in a beautiful old
stone two storey building with a lovely courtyard. There would have been
somewhere between 20 and 40 apartments there.

There was a software / techical business of some sort in one corner, but I
don't think I saw anyone else.

(Thank you AirBNB)

~~~
bogomipz
Did you rent the flat from AirBnB then? I'm not understanding your comment.

~~~
bogomipz
Why the down vote? seriously? I am asking for clarification because I am
interested if you were speaking about the upside or the downside? Its not at
all clear.

~~~
emmelaich
I didn't downvote you.

The thanks to AirBNB was as an aside. I think we rented AirBNB but to be
honest not sure; might have been one of the many other under the radar holiday
house schemes available in Italy and other places.

However the phenomenon under discussion clearly makes something like AirBNB
possible -- and good luck to them.

Whether it is an upside or downside overall -- I do not know.

(I have now upvoted both of your comments)

------
s_q_b
In DC, there's a big glut in foreign capital flowing in from foreign oligarchs
and elites, particularly from Russia and China. Residential properties in so-
called "safe cities" are both a form of investment and a potential life-raft
should the political situation change in their nations.In addition to the
artificially low supply created by extreme height limitations, this has caused
prices to skyrocket.

The apartment in which my girlfriend and I live now was a cash purchase after
only three days on the market with no escrow. It had to be, or someone else
would have bested it. If you need a loan to buy? Forget it.

Meanwhile, there are six immaculately tended walk-ups on the block that have
been completely empty for the past year, but for the staff.

~~~
conception
Vancouver recently enacted an anti foreign buyer tax that seems to have almost
completely stopped the practice. Curious if we will start to see more and more
of this local protionism.

~~~
antisthenes
Unless every desirable city introduces this tax uniformly, doesn't this just
shift the burden from Vancouver onto other cities?

~~~
r00fus
This is why it should go viral. Wealthy individuals/ buying houses in droves
to sit empty does not benefit anyone in the long run.

What happens when the bubble pops?

~~~
keithpeter
What happens _until_ the bubble pops I think is the question. To quote the
OA...

 _" In the evenings an eerie stillness settles on [the area]. That’s because
these new owners are so rich in both money and global property that their
London addresses frequently sit empty, functioning more as dust-sheeted
deposit boxes rather than actual homes."_

This is not why we have cities. We have cities to allow interaction. Look
where the artists, musicians and marginal people are going, for they are the
new thing. Hint: it isn't London.

~~~
monknomo
I see similar comments on all of these articles and I am really curious which
UK/USA/Canada cities that artists and musicians and the like go to.

I'm going to throw out Nashville as a thought for musicians, and maybe
Pittsburgh for tinkerers.

~~~
TheOtherHobbes
UK artists are heading to Berlin, Paris, Barcelona and Warsaw - at least they
were, until Brexit.

Now there's some interest in the cheaper seaside towns - Margate, even
Bournemouth.

Brighton used to be on that list but it's almost as expensive as London now.
Likewise Bath and Bristol. (Not seaside towns, but a big arts scene in the 60s
and 70s, now very much gentrified.)

I suspect if people can't get out they'll head West and North. Parts of the
West Country are almost affordable. Parts of the North are very affordable,
but they're still in the dilapidation phase and don't seem to be in danger of
becoming cool yet.

~~~
monknomo
It's tough to figure what pulls a place out of the dilapidation phase. I've
heard people say a microbrewery is a good harbinger. I have this unformed
suspicion that a hipstery cheap-fancy restaurant can do it, or the "right" art
gallery

~~~
PieterH
My area of Brussels has been slowly pulling itself out of dilapidation for
decades. The signs are e. g. new bars and shops that don't close after six
months, and of course the inevitable loftification of older buildings. There
is no single event. It takes masses of people to move, invest, and thrive.

------
naravara
The Onion proves itself prescient yet again:

[http://www.theonion.com/article/report-nations-gentrified-
ne...](http://www.theonion.com/article/report-nations-gentrified-
neighborhoods-threatened-2419)

~~~
gyc
nottheonion: [http://i.imgur.com/jb61R2B.jpg](http://i.imgur.com/jb61R2B.jpg)

~~~
paulsutter
i need to quote your link so nobody misses this gem:

> ...many Palo Altans said the project was too big and moving too fast. "It
> just seems to me that a billionaire can come in and get whatever he wants
> and run roughshod over average millionaires like myself," said Crescent Park
> Neighborhood Assocition presi...

------
ryandrake
The problem is not specific to foreign investors. Local investors are also
more than capable of buying up perfectly good homes and letting them sit there
vacant and unused. Whether the people are foreign has nothing to do with it.
The problem is that society tolerates this practice of investors swallowing up
housing, pricing people out of the market, and then leaving perfectly those
good homes vacant.

Couldn't the solution be simply to enact a sufficiently punishing property tax
rate on property not owner-occupied for more than 300 days of the year, so
that these "investments" lose money? That would stop the practice, and maybe
we'd see actual people/families moving in again.

~~~
astazangasta
A land value tax (famously advocated by early political economist Henry George
of San Francisco) does exactly this: you tax the unimproved portion of the
value of property, and don't tax improvements. Land that has high value
unimproved therefore costs money to sit idle; this encourages landlords to
make improvements, rent out their space, etc. It also means landlords don't
benefit from the portion of value that does NOT stem from their improvements,
i.e., it discourages speculation.

~~~
tmnvix
It also has the added benefit of making productive investment (e.g. in a
business) relatively more attractive than what many choose to do now - i.e.
purchase property with the intention of capturing much of the value (in the
form of capital gains) created by public investment.

A rentier economy is neither sustainable nor desirable.

------
r00fus
And... this is what happens when you don't tax foreign cash infusions.

For those who think we should get rid of taxes on cash repatriations - this is
likely an outcome.

~~~
valkea
Foreign capital investment is great, so beneficial to the economy.

The problem is with the housing market. Perverse subsidies, out of date zoning
laws, and a lot of nimby based lobbying. Fix these things and I doubt anyone,
including foreign investors, would be parking capital in property and just
leaving it unused.

~~~
r00fus
And that's why you use a tool like taxation to modify behavior to encourage
positive outcomes.

~~~
valkea
Taxation shouldn't be used as a tool to modify behavior. That's actually the
exact opposite of good tax policy. Taxes should be broad based, with few
exemptions, to raise the needed revenue while minimizing side effects.

The distortions in housing markets are often partially caused by tax policy,
and those areas should be addressed (tax deductions for mortgage interest for
example). Other than that, it's best to actually deal with the root problem:
outdated zoning laws.

~~~
stuaxo
Taxation is a great tool for changing behaviour in many places.

------
scotty79
What bothers me is that price rises but those are the same crappy apartments.
When a flat costs millions I'd expect it to be absolute marvel of modern
technology.

~~~
jrockway
There is no financial incentive. People have their heart set on living in a
super-popular city, but they won't pay extra for nicer finishing. They find
all available money, then take out a loan that's 100% of their income (their
income will go up over time, after all), and buy whatever is available.

You can get a nice apartment, but you're talking double or triple the price of
common "the walls were last painted in 1872" apartment. There was a nice 750sq
ft. apartment in Brooklyn Heights I was looking at recently. 3 million
dollars. Who has this kind of money!? (The key is being married to someone
that makes as much money as you do; for me, 1.5-2 million dollars would then
be very conservative. Good luck if you're single or your spouse doesn't work.)

Fortunately, this is a New York-ism. If you're willing to move west (not to
California of course!) then you can get a super nice home in a nice city for
hardly any money at all.

~~~
tacostakohashi
Absolutely, I have been battling this lately with a 50 year old coop in
Manhattan that needs renovation. The magnitude of pain involved is
unbelievable. You want to strip and paint those 1872 walls? Guess what, lead-
based paint, inspections, permits, abatement, management company, board
approval, etc, the list goes on.

It's basically not economical to re novate anything if you value your time, so
if you value living anywhere nice you have to pay the 2000/sqft give or take
for something modern.

------
sandworm101
I'm shocked that london, vancouver, SF and a few other cities are still
functional. When working lawyers and doctors can no longer afford to live in a
city, what actually happens? Are these now theme parks? Retirement villages
for the uber-wealthy?

Some (SF, seattle) have developed this strange mix of the very very rich and
the homeless on the street. Others (Vancouver) see inverted traffic patterns
as more professionals (carps etc) drive into residential neighborhoods to work
on houses than residents drive out. Suburbs are now industrial zones, places
where people go to work. Anyone who can afford to live in the suburb, in a
detached house, can live on investments alone.

I ran into a teacher from my old school last year. In my day, the school built
doctors and lawyers. Everyone went to university. Now, the kids are so rich
that they have no drive. None want to be doctors anymore. Doctors have to
touch sick people. How do you motivate a kid who knows he has a guaranteed job
at his parent's investment firm, that has trust portfolios that will support
him forever?

~~~
Tiktaalik
>Others (Vancouver) see inverted traffic patterns as more professionals (carps
etc) drive into residential neighborhoods to work on houses than residents
drive out. Suburbs are now industrial zones, places where people go to work.
Anyone who can afford to live in the suburb, in a detached house, can live on
investments alone.

Do you have a source that more people are driving from the Vancouver core out
than in?

I wouldn't describe Vancouver this way. The region was planned to have many
regional centres, so that there is no mass migration from the 'burbs into the
downtown. Instead people live and work everywhere.

There are more people working in downtown Vancouver than ever before, but
traffic volumes in have been unchanged since the 60s. This is possible because
of public transit and massive increases in the amount of residential density
in downtown enabling people to walk to work.

~~~
sandworm101
They don\t commute from the core to the burbs. They move in from the
hinterlands. People living in chilliwack, burnaby, Squamish and even further
afield are commuting in. They are working on houses, on the industry that is
every-rising house prices.

Watch the lions gate bridge or the upper levels highway on the north shore.
Watch what rush hour is these days. The 7:30-8:30 rush across the bridge is
barely a thing. Now it's thousands of pickup trucks driving into the burbs at
around 6:30, ready to fire up tools come 7am.

------
bogomipz
Its been an interesting year for stories about how hot capital moves through
the "globalized" world. It seems that there's been an uptick in these types of
stories. Is there a connection with this uptick and the release of the Mossack
Fonseca "Panama Papers" or is it simply getting harder and harder for obscene
amounts of money to be discreet?

------
djhworld
My mother used to live in Belgravia, in one of the buildings pictured in that
article, when she was a young girl.

....well when I say lived there, my grandparents were caretakers so they lived
in the basement.

This was back in the 1960s mind, but even back then Belgravia was an extremely
affluent area, with Lords, major industrialists etc living there.

~~~
mtkd
> living there

Most of the home owners referred in the article don't live there for more than
a few weeks a year - if at all - there is a material inbalance

I live in a village where people buy 2nd homes or they buy to retire - the
locals slowly drift away to nearby towns to live in shared accommodation

The life gets sucked out of the village over time - house prices go up - but
the problem is deeper than that - the school closes, the public transport
frequency reduces (nobody commutes), the local shop closes (as
pensioners/visitors buy online for delivery), the pub closes ... the only
infrastructure with any growth is the doctor surgeries - more of those are
planned right across the county

It's not a sustainable position - there are 2 families in a village with 80+
houses - the few businesses that are left have no pool of resource to hire
from - we live next to a cow farmer with 400+ cattle - he has no help - in any
normal world he wouldn't be working from 6am to nightfall like that

------
davidf18
The reason that housing is increasing in cost is because of a market failure
where politics is used to create housing scarcity, called "economic rents." In
this case, the use of politics to create zoning laws that place artificial
restrictions on housing density. As in any form of "economic rents", this
benefits a special interest group -- in this case the landlords over the
general population of rents and buyers of houses.

In another case of politics creating scarcity was the artificial limit of
13,000 taxi medallions in NYC. Uber/Lyft fixed this scarcity by increasing the
supply of taxi-like vehicles while lowering the cost of taking these vehicles.
The price of a taxi medallion was $1.2 million prior to Uber/Lyft is now
$700,000. With the political restriction on taxi medallions effectively
eliminated, the "taxi landlords" lost out and the consumer gained.

London, NYC, DC, Boston, LA, SD, SF and other cities all have these
restrictive zoning laws that artificially limit density to increase housing
costs.

Economics Nobelest and NYTimes columnist Paul Krugman has discussed this.

Harvard Economist and city expert Edward Glaeser has written extensively on
this topic. Financial Times columnist (with a BS and MS in Economics from
Oxford) addresses this topic in "The Undercover Economist." He discusses how
in the 1930's London had Green Belt (park) surrounding the city installed
which has resulted in increased housing prices for landlords. But bad zoning
laws that limit housing density has also contributed.

See: Edward Glaeser: Build Big Bill [http://www.nydailynews.com/opinion/build-
big-bill-article-1....](http://www.nydailynews.com/opinion/build-big-bill-
article-1.1913739)

Tim Harford: The Undercover Economist (2nd Ed). This book has sold over 1
million copies
[https://www.amazon.com/dp/0199926514/](https://www.amazon.com/dp/0199926514/)

David Ricardo explained this in 1817. David Ricardo: On the Principles of
Political Economy and Taxation
[http://www.econlib.org/library..](http://www.econlib.org/library..).

See Ch 2.3 - 2.5

~~~
legulere
The zoning story is pretty much bullshit and is told by developers that want
to replace the buildings with even lower density, shittier but still pricier
buildings.

The Eixample district in Catalonia has one of the highest population densities
in the western world without high-rises:
[https://en.wikipedia.org/wiki/Eixample](https://en.wikipedia.org/wiki/Eixample)
Its population density is higher than the one in Manhattan and probably also
any parts of the other cities you listed. It didn't achieve that by ditching
zoning laws.

~~~
davidf18
Actually, if you read the references by the economists that I cite, in most
situations the developers want to maximize profits which means building for
higher density. In much of Manhattan, for example, there are many areas with
low 6 story brownstones that could be replaced by higher towers, but the
zoning laws don't permit this. In London, where I have lived for about 6
months altogether and in the American cities I mention, the issue is bad use
of land because of poor zoning codes.

I lack the experience to comment on the situation that you mention relating to
Catalan.

------
optimuspaul
It's absurd that private citizens can own land now. What was the crown
thinking?

------
TheSpiceIsLife
Can anyone explain the purported benefits to society of allowing non-resident
foreigners to own residential property?

Who is this supposed to benefit? I mean, other than real estate agents,
solicitors / conveyancer, and the initial citizen who sold the property.

What prevents us (whoever 'us' is in your case) from banning foreign non-
resident residential property ownership.

~~~
grkvlt
Banning foreign non-residential ownership is insane! You apparently want to
live in a world where people are not allowed to buy a holiday cottage in
France? Or prevent people from buying a city pied-a-terre and a country house?
If I have the money, and I want to purchase another house in another country
or city, I should absolutely be able to do so, and I cannot imagine a world
where this would ever not be the case... And, to answer your question,
purchasing the house benefits _me_ , the owner. I now have my own place to
stay in another country or city, whenever I want to go there.

~~~
TheSpiceIsLife
True, good point. I might conjecture that not-banning non-resident ownership
is proving to be a bit wobbly too though.

I suppose I should say something like: as we more in to a world where more and
more people have the ability to access foreign residential property as an
investment class we might need to rethink the rules around foreign non-
resident property ownership for residential property, under some
circumstances, perhaps, maybe.

------
mnx
I wonder how much of the empty apartments are caused by laws which make it
risky to rent, by making it hard to get rid of a tenant in a timely matter.

------
microtherion
I'm reminded of the Rolling Stones' _Play With Fire_ :

    
    
      Now she gets her kicks in Stepney not in Knightsbridge anymore.

------
msie
I cringe at some of the comments here where people have already written off
cities like sf, vancouver, London, DC etc. Their entire perception of those
places is through a couple sensationalist news pieces.

~~~
1_2__3
Really? Because I either live in or have spent a fair amount of time in those
places and I promise you there's no overblown rhetoric involved here. This is
what happens when a significant fraction of the world that previously was
unable and unwilling to relocate suddenly begins spreading across the globe.
Not only is what's going on real, it was easily predicted decades ago.

------
msrpotus
If they aren't living there, why don't they just rent a lot of the houses out?
I guess they don't need the money but that has always struck me as weird.

~~~
mywittyname
I believe this is to not draw attention to the property. There was a Planet
Money podcast a while ago about how high-end real estate is being used by
foreigners to launder money. If the FBI catches wind, they have tools to seize
the property and remunerate the proceeds.

I'm guessing that renting the property means involving the IRS and potentially
their foreign counterparts in the person's home country, both of which could
increase the likelihood of getting caught.

~~~
Symbiote
This has nothing to do with the FBI or IRS; it's in London.

The UK's territories include several actual tax havens (the Channel Islands,
Isle of Man, Virgin Islands, Bermuda, Cayman etc). Many tens of thousands of
houses are owned by corporations registered in an offshore tax haven.

There's a map of British property registered in a tax haven:
[http://www.private-eye.co.uk/registry](http://www.private-eye.co.uk/registry)

~~~
spearo77
IRS requires reporting of income and bank balances from overseas sources and
institutions. They collect tax on them.

~~~
CyberDildonics
Of USA citizens, not the whole world

------
tmnvix
It's interesting how this seems to play out politically.

\- Wealthy foreigners purchase property primarily as an investment.

\- Said property is left vacant or only used infrequently.

\- Locals that would otherwise have lived in these wealthy neighbourhoods
start purchasing elsewhere.

\- A chain reaction occurs putting pressure on prices down through the market.

\- This is interpreted as a shortage of homes.

\- Poorer immigrants are blamed for the increased demand.

I'm certainly not suggesting that this is sole reason for rising property
prices (I think buy-to-let is probably a bigger issue), but I think that the
simple assumption that most people make - i.e. that there is simply a shortage
of _homes_ is lazy and likely incorrect. There are two sides to the supply and
demand equation and the typical focus on the supply side as the underlying
issue is problematic.

In my opinion, more attention should be given to the demand side of the
equation. A speculative boom _creates_ demand - not for homes but for
'investment' opportunities.

There is a survey carried out each year in Melbourne (a city with similar
property market problems to London and Vancouver) by an organisation called
Prosper Australia. It is called the 'Speculative Vacancies Report' and is
conducted using an interesting methodology.

Typically, the vacancy rates you hear about in the media are sourced from the
real estate industry and are collected by asking agencies what percentage of
properties on their books are currently vacant. A typical response is
something like 3%.

The Prosper Australia report instead looks at water usage per property and
shows much higher vacancy rates (close to 30% in some areas of Melbourne).
Interestingly, higher vacancy rates correlate with areas that have higher
price appreciation. This is not at all intuitive if you assume a simple
relationship between supply of residences and demand for homes. It is more
understandable if you consider that the demand side is in large part driven by
people seeking speculative investment opportunities rather than homes.

Given all of this, I think that the solution is not to be found in building
more homes (likely to make any crash worse) but in making property less
attractive as an investment. In many markets, this wouldn't mean punitive
measures but instead removing existing incentives and possibly better
regulation of lending so as to ensure banks and investors are left in no doubt
that the risks they take when speculating (especially leveraged speculation)
are their own responsibility and the taxpayer will not prop up the market for
their benefit when prices stop rising (I say 'stop rising' and not 'fall' here
because in a speculative boom that should be sufficient to lead to a fall if
it lasts long enough).

------
rajeshp1986
we are not managing the land area efficiently as a result the major cities are
getting overpopulated. I don't understand the point of paying millions for a
1/2 bedroom apartment in the middle of a city and then complain about city
traffic and congestion.

------
virtuexru
Oh no; the rich aren't rich enough guys!

~~~
smitherfield
I mean, it's a pretty common sentiment around these parts.

(Replace "London" with "Bay Area")

(It's a very rare person who ever thinks of themselves as "rich enough." Most
billionaires don't)

~~~
toephu2
How many billionaires do you personally know?

~~~
HippoViolation
One. can confirm!

------
melling
If only there was a way to make living within a city less important.

There must be some way to move large numbers of people over "great distances"
(50-100 miles) in a more commutable time.

~~~
chadgeidel
Not sure if you are being sarcastic. The buyers driving up prices don't live
in London.

From the article: "Today, 60 percent of properties for sale in this part of
London go to international buyers."

~~~
p1mrx
Can't we solve this problem with virtualization? Build houses in the middle of
nowhere, but assign a central London address.

~~~
titanomachy
Haha this is great.

On a more serious note, maybe banks could offer some sort of investment
vehicle made up of homes in a certain area. The homes would then be rented out
for revenue, and foreign buyers could have an equivalent financial position
without driving away actual residents.

~~~
stuaxo
I had a similar idea but with lower and lower ceilings, you could have 100s of
apartments at one address with 1cm ceilings, but great sq footage.

Virtualisation probably makes more sense though.

~~~
CyberDildonics
Or... miniaturize everything. Great square footage, looks huge, but ceilings
are only half height. Display it with half size furniture, half size
appliances, etc. Money in the bank.

