London’s super-rich are huge contributors to the United Kingdom’s economy, according to research that explores the financial impact of the capital’s wealthiest homeowners. The study reveals London’s richest spend £4 billion a year on goods and services. Foreigners investing in London property have become a political concern. Overseas buyers are pricing Londoners out and then leaving the homes empty in a city short on housing. About 1,300 homes were sold throughout London for over £5 million in the last ten years. According to Ramidus Consulting, an economic consultant, 60 percent of these properties were purchased by overseas buyers.
The study revealed owners of homes worth over £15 million put at least £4–£5 million back into the economy. Owners of homes worth more than £5 million spent £2–£3 million a year. A huge portion of expenses were for domestic staff, professional service fees, medical expenses and decoration, as well as school fees, insurance and holidays. These expenditures apply where owners stayed in the UK less than 90 days a year as many homes maintained a staff year round even in the owners’ absence.
Sandra Jones is a consultant and associate at the Centre for London where this research was presented. She said it’s wrong for homes to be left empty in an overcrowded capital, adding, “There is a risk that the debate conflates a problem with a small number of huge mansions with a wave of overseas investment that has positive economic consequences.” Ben Rogers, director of the Centre for London, sees the good and bad side. “The wealth that one sees in the West End makes us all uncomfortable, but it’s hard to deny that the super-rich contribute a lot to the London economy. The problem is their contribution is often hidden.”
Developers counter that foreign investment is vital to kick starting construction, offering the opportunity to deal with long derelict sites like the Battersea Power Station. It’s a view supported by London mayor Boris Johnson. He believes it would be a mistake to discourage foreign investors considering their impact on the capital and regeneration. On the other hand, Johnson stated London homes need to be lived in or rented out, as opposed to being utilized as “blocks of bullion” by overseas owners. This was in reference to claims of properties held as “reserve currency” for the global wealthy. The mayor also called for new properties to be marketed as “first or equal first” to Londoners rather than pitched overseas.
Rising prices, especially at the high end, have prompted initiatives for foreign buyers to pay higher local taxes. Consultant Jones believes wealthy spending levels suggest there’s room for increases in upper levels or a “rebanding” of council tax. Director Rogers said a portion of reformed council tax on very high value homes could be utilized for local projects, concluding “It’s important for the social contract that very wealthy residents are contributing locally as well as to national coffers.”
The level of new housing construction is lower than before the financial crisis. Some are saying the lack of supply is the root of the housing crunch, not the increased demand coming from foreign purchasers. Meaning the bottom line aren’t the empty homes owned by the super-rich, it’s the lack of supply to meet demand that’s feeding the problem.