Metro - 23 May 2014
Billionaires – are they good or bad for the London property market?
By Jo Eccles
There has been a lot of press recently about the number of billioniares living in London and whether they contribute to London life, or hinder it. According to reports, there are now nearly 100 billionaires living in London, more than in Moscow and New York. With a combined wealth of around £250 billion, they are often blamed for driving up prices of assets, including property.
However, given that they reportedly represent around 0.000008% of the London population, it’s quite hard to attribute too much blame. Yes, their spending power will affect the super prime properties of £20 million upwards, but that tends to have very little knock-on effect on the ‘normal’ end of the housing market. If anything, there is an argument that many of the world’s billioniares are in fact easing London house prices as they are helping to address the housing shortage in London, which is one of the major causes of high house prices.
London desperately needs more homes, and current build rates are less than half the target number each year. However, some of the largest schemes being built in London, such as the Olympic Village in Stratford, Battersea Power Station in Nine Elms and the redevelopment of Earls Court, are being backed and funded by a number of extremely wealthy Asian and Arab investors and consortiums. A significant proportion of these developments are made up of affordable housing, in line with planning requirements, which provide much needed housing for London’s key workers and the not so wealthy.
When these super prime buyers do purchase a property at the high-end, they pay 7% stamp duty each time. In 2012-2013, purchases of prime central London property generated over £700 million of stamp duty revenue which is more than Northern Ireland, Wales and Scotland combined.
There are plenty of problems with the London property market, and the causes for unaffordable house prices, but super prime residents isn’t one of them.