25 Sep 2013

From Kuala Lumpur: How Britain is exporting its homes

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Britain is now exporting its homes en masse.

Another set of towers, in model form, are backlit in the suite of a 5 star hotel.

Capital Towers is in fact a project in Stratford, East London, part of the Olympic Park regeneration plan. The flats are up for sale at events like this that span east Asia, and in Kuala Lumpur, 6,500 miles away.

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Buyers crowd around the models checking out the floor space and attractive features of living in Stratford, measuring the distance to Heathrow by tube and the yet to be completed Crossrail project.

This foreign sales drive is repeated in Hong Kong and Singapore, targeting investors across Asia.

“The past few years there’s been exponential growth in UK housing market. I’d be buying for [rental] investment. Stratford for me is on the outskirts but travelling time is not too far by train about 20 minutes.

“The UK government is going to invest to develop,” said Kelvin Lin, a prospective buyer who visited London once a few years ago. “There are no restrictions [on buying] in UK, the agents said there were in Australia”.

Another buyer says she like London because “it has a very good rental market, lots of professionals”.

But it’s not just the super rich – an oligarch buying a bolthole in Mayfair. These are upper middle classes of the world looking for a safe bet for their abundant savings- the London property market.

It’s a quite a sales job. Right now Capital Towers doesn’t actually exist: it is half derelict factory half the Bow hand car wash. But it is due to complete by 2016. There’s still plenty of time to fulfil the typical 18 month build time for a project of this type.

“[Foreign buyers] have become very important. We’re all aware of the difficulties of raising debt,” said one housing analyst. Knight Frank calculate that 75 per cent of new builds are going to foreign owners, half of those from East Asia.

I’ve already reported about One Commercial Street, the project that the chancellor chose to symbolise the rebirth of the economy under the coalition.

Developer Redrow confirmed to us that 40 per cent of the cost of the total project has been raised by selling flats in East Asia. That is considerably more than 50 of the 137 private flats on the development.

Seventy flats are for affordable housing, and have a separate entrance.

Does this matter? On the one hand, who cares if the world’s supersavers use our capital city as a property piggy bank. On the other, some developments are not put on sale to Brits, or they are at a later stage and a higher price.

The foreign purchases are cash purchases that help to fund housebuilding that is not funded by weary banks. East Asian investor appreciate the macroeconomic and legal stability offered in Britain.

A KL estate agent told us that the trade is essentially “a currency hedge” made possible through the fall in the value of sterling.

Tellingly, other nations, Australia and Singapore have laws to restrict this type of flow of property purchase.

Indeed, investors we met in KL said that the free-for-all in London was one of the principle attractions versus say Australia (where a foreigner can only sell property to an Australian) or Singapore (where foreigners are not allowed to rent their flats, have more than one, own houses, sell within five years, and many pay an additional stamp duty of five per cent).

So additional stamp duty on these transactions is an intriguing policy suggestion.

Above all, if Knight Frank are right, surely the London Assembly or the DCLG need to be counting out the “exported” homes.

Only then will we have a real idea of what the shortfall is. And we may just find out that what little housebuilding there is, is of limited benefit for the British property dream.

This is part of our #brokenladder series.

Follow @faisalislam on Twitter.

12 reader comments

  1. adil says:

    It is good to see reporting that the housing market (I think it’s really better to call it the hosing market as we will get hosed when this falls apart) is inflated – and dangerously so. Simply building more homes is not the answer that will add more fuel to the fire. Addressing the root cause which is speculation and regard of domestic housing as a commodity. These investors will quickly see there is a dwindling demand to occupy these homes. It’s coming real soon now.

    I agree to be draconian and simply remove domestic housing from the portfolio of commodities that can be invested in. It is too dangerous and the financial services have proved they cannot be trusted to act responsibly (and for that matter neither have the Government).

  2. HenPen says:

    I wonder if the issue of property ownership by organisations from outside the EU has been broadcast widely enough. The danger is that the issue could easily be seen as xenophobic. Whereas the real issue, is the effect on the economy. Am I right to asume that these projects increase inflation in the UK which has been driven up by the building sector anyhow? The British property dream might therefore not only find its limitation by the fact that these properties are out of reach for most British buyers but in addition any consequential anti inflationary measure by the Bank of England will hit potential buyers who need a mortgage and worst of all the whole economy will be hit once again. It could be worthwhile interviewing government officials on the topic to make clear that a lack of legislation is responsible and that government is accountable for exporting UK homes.

  3. Nick Gray says:

    I applaud C4 for spotlighting this issue.

    Whilst I appreciate that the problems of foreign investment in London’s property market may be of little interest to those outside the capital, I think you could go a step further and apply the same stamp duty levy to those buying a second home or for the purposes of speculation.

    Passing on the proceeds to first time buyers surely makes more sense than senselessly driving up prices and widening the gap between rich and poor.

  4. Simon W says:

    To say that the UK is exporting its homes is a bit of hyperbole. Last time I checked I didn’t see ships leaving the port of London stacked with maisonettes.

    The fact of the matter is that they are being built and are adding to the housing stock. Who owns them for now is irrelevant as they eventually will be sold on. My home is over a 100 years old and has had many owners both foreign and domestic and so it shall be with all these units.

    What concerns me is that you are looking to Australia and Singapore for inspiration. Australia’s policies towards immigration and foreigners are to the right of UKIP’s. As for Singapore to call it a democracy is a bit of a stretch, the Economist politely calls it a hybrid regime just one step over an authoritarian regime. Both are hardly good places to start.

    Perhaps one should look at Canadian markets such as Toronto and Vancouver to look at how both those cities are dealing with remarkable housing growth.

    At the end of the day I was shocked to see you pander to the ever increasing xenophobia that is creeping into Britain’s everyday life.

    1. maske says:

      Is it xenophobia?

      Or is it a concern that normal everyday people are being forced away from their roots because they can’t afford housing?

      Or is it concern that there are 80000 british children in sheltered accomodation?

      But that’s ok, as long as some upper middle class Malaysians make a few quid.


  5. Philip says:

    This is bonkers. At least we need to screw a lot of tax out of them. But all it does is fuel property price inflation with massive economic & social knock-on effects (e.g. would we need a “bedroom tax” if there wasn’t this sort of speculative investment from abroad?)
    Isn’t ironic – we tend to blame the EU for all our ills, yet it’s actually that big wider world which the anti-EU lot have such a strong believe will turn us into an economic powerhouse which is messing up our economy in this way. And will it get mentioned in the Sun, Mail or any Murdoch media? We desperately need more homes & not being bought & rented at absurdly high prices – and local inhabitants should have first crack, not overseas investors. But do I see this government doing anything about it? And if “Red Ed” makes some proposals, he;’ll be immediately attacked for socialism & anti-overseas investment by the right wing jackal media

    1. ukgoldbug says:

      You really are a statist aren’t you? Why do we need to screw a lot of tax out of them? If you choose to buy a house in the Algarve or Florida should you be fleeced just because you don’t have the right passport? Is it not enough that people actually want to come to Britain and invest large amounts of money here- money that benefits the British economy? Brits have been the largest buyers of foreign property for most of the last 30 years but now we have foreigners coming here to do the same all the brainwashed tax cattle scream for blood. Start screaming for less tax for us instead of more for others and we’d all be better off.

  6. Andrew Dundas says:

    Buildings cannot be “exported”.

    Buildings are immoveable property.
    Foreigners who buy any UK property – including football teams – can’t take them away. They’re fixed to the ground here.
    True, they can buy our football players. And we can buy foreign players back. But those ex-patriot guys don’t have a long playing life.

    It’s OURSELVES who make property expensive: WE set up and maintain the Cartels who severely ration land with permits for restricted development. It doesn’t have to be that way. [It’s our choice, which I don’t want because it makes property expensive for you younger folks].
    The UK has always been a good place to invest money. We’ve never had a debt problem. Not even recently. Property is more secure here than almost anywhere else. Has been for 400+ years.
    We can afford to spend money. It’s just Osborne who’s frightened us, so he can get the power to hurt the poor. As in the 1950s, he’ll let rip just before the next election to follow his bist with a short-term boom.

  7. Robert Fraser says:

    Let’s get the facts right here. A ‘proportion’ of developments are sold in Asia & it’s been going on well before pre Hong Kong handover days in 1997. Buyers in the Far East are used to buying off plan and a large percentage buy their own homes off plan. So it makes sense that developers sell new buildings in a forum in which buyers are comfortable. BUT it’s complete & utter nonsense that local buyers miss out on these schemes, most developers will give their registered interested applicants a preview.

    One last thing & a signficant point missed out by this journo & other scaremongers in the press looking for a story, is that the interest from Asia & other international locations kept the London housing market active from 2008 to the end of 2012. It kept people in the building industry in jobs, developers in business AND low cost housing, a pre requisite for planning permissions were still being built by the same developers.

  8. Huatyeswee says:

    Am glad to listen to this feedback trails as rational heads will prevail. Aggregate lending is the stability here even if buyers are overseas as it props up the economy post-Lehman crisis.

  9. Julian Cheyne says:

    ‘Capital Towers is in fact a project in Stratford, East London, part of the Olympic Park regeneration plan’

    Capital Towers is not in the Olympic Park and is not part of the Olympic Park regeneration plan.

  10. Jon Pratt says:

    Hmmm, love the comment from Robert Fraser. Suspect he may be in the real estate business… what should have happened in 2008 is that all the current property companies should have gone bust and their ‘land banks’ should have been purchased for a pittance by newly created companies, who would have thus been able to afford to develop reasonably priced housing for the people that actually live in London…..

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