A non-existent block of flats just fully sold out. In five hours. The real thing will apparently rise out of the ground somewhere near London’s Canary Wharf in 2019, but right now it’s just a promotional image and a pile of cash for the developer.
And what cash these towers generate. Non-existent “studio flats” (that means one room) sold for £350,000, while non-existent three-bedroom flats sold for £1.25m: the developer will take a cash deposit now and the full enormous sum when the flats are built in several years. Chances are as well that many of these non-existent homes will be sold on again for a profit while still in their conceptual state. That’s what has been happening down the river at the project around Battersea Power Station, according to the FT.
Even once these towers are finally built, there’s a big question mark over how many full-time homes they will actually provide. At Canary Wharf, half the buyers were overseas investors and a large proportion of the UK-based buyers are also likely to be investors rather than home seekers.
Does this matter? Homes are at least being built and most investors will rent out their property to make a return, increasing the number of available rented homes.
I think it really does matter.
The fact that London’s property market is becoming a physical stock exchange for the world’s rich undermines the idea that we need new homes at all. Why bother building if we are just going to sell fantasy apartments to speculators in Hong Kong or Singapore?
At Shelter we’ve been calling for all political parties to support policies to get England building 250,000 new homes per year, almost double the current rate of building. We argue that to meet people’s needs and aspirations half of these new homes must be more affordable than the market: either at a social rent or for low cost home ownership. Simply building for the top-end market won’t solve the housing shortage.
We’re calling for this surge in building because it is desperately needed. Around 220,000 new households form in England each year and there is a huge backlog of people who need homes. One in four adults under the age of 35 is living with their parents, homelessness is rising and council waiting lists are well over a million.
Our calls for action are starting to cut through. Housing was a bigger issue for voters at the recent general election than it has been at any for 30 years. All parties agreed on the need to build more, and increasingly the public are on board with this too. But public support can quickly turn to anger when we see development that looks as if it’s not for people like us, or for our kids. This is dangerous. The evidence is clear that we are more likely to support new homes if we think it will help local families get a place of their own.
So there needs to be a bolder approach. One that looks at both the demand for homes as well as the supply of them. We need to gradually make it less attractive for investors to buy homes purely to speculate on future prices: after all, it would be far better for the economy if their cash went into something productive like new businesses. Making this change could require further tweaks to the tax system – a process that George Osborne has started with higher stamp duty on the most expensive properties and cutting back some of landlords’ generous tax breaks.
At the same time though, we’ve got to get building high quality, genuinely affordable homes. This isn’t rocket science. Shelter and the IPPR have just published a plan to get England’s successful mid-sized cities, places like Bristol and York, building the homes they need. This means giving these cities stronger powers to get land into the hands of local builders and strongly incentivising urban and rural councils to work together to identify growth areas. It also means George Osborne prioritising investment in new homes at the upcoming Comprehensive Spending Review, which is a critical moment to prove the government is serious.
Right now the housing market is broken for people who just want a place to call home. Fixing it is possible, but will take a proper strategy of reform and investment from central government and strong leadership from our cities and councils. Until then, we’ll just see more fantasy towers for speculators while millions of real families pay the price.