Monday, April 8, 2013

Lights-out London

Central London is home to some of the world’s most valuable real estate, including the Belgravia district. Image credit: Warrick Page for The New York Times.

I spied this intriguing article in The New York Times. Sarah Lyall had reported on "lights-out London" – the phenomenon whereby mega-rich foreigners (often from corrupt plutocracies like Kazakhstan and Russia) are buying up whole neighbourhoods in London, driving up house-prices beyond the reach of locals, and then treating their houses as holiday homes. They stay for a few weeks once or twice a year, leaving whole neighbourhoods vacant and shuttered through most of the year, which kills the local businesses and turns central London into something of a ghost town.

In its report, real estate firm Savills found that in 2011-12, 34 percent of people buying residential properties in the resale market in prime areas of London – places like Kensington, Chelsea and Mayfair as well as Belgravia – were from overseas, up from 24 percent in pre-crisis 2007. In the most exclusive spots, foreigners accounted for 59 percent of the sales.

This has made parts of London more international, more expensive and more empty. Certainly, prices are rising beyond expectation. For single-family housing in the prime areas of London, British buyers spend an average of $2.25 million, Yolande Barnes of Savills said, while foreign buyers spend an average of $3.75 million, which increases to $7.5 million if they are from Russia or the Middle East.

Alistair Boscawen, a local real estate agent said that he works in “the nuts area” of London, as he put it, “where the house prices are bonkers” – anywhere from $7.5 million to $75 million, he said.

London’s housing market is at odds with that in the rest of the country, floundering since the 2008 crisis and now hit by a new wave of austerity-driven budget cuts. While housing prices outside the city fell by 10 percent in the last five years, inside London they increased by 21 percent. In Mayfair alone, they rose by 30 percent. A house in Chester Square that sold for $2.4 million as a long-term lease in 1987, Boscawen said, sold last year, as an outright purchase, for $48 million.

The buyers, increasingly, are superwealthy foreigners from places like Russia, Kazakhstan, Southeast Asia and India. For them, London is just one of the stops they make annually.

For the rest of us commoners, we will have to save, save and save before we can even think of visiting London in the summer!

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