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International investment in London housing market unfairly maligned says housing expert

International investment kept residential development alive in central London in the aftermath of the financial crisis, and remains important, a leading housing expert will say at a conference at LSE today.

Christine Whitehead, professor of housing economics at LSE, will point out that international buyers purchasing properties off-plan, gave developers the cash flow and the confidence to go ahead with major projects that otherwise would have stalled. These developments included some thousands of affordable homes, which were secured through planning agreements negotiated before the financial crisis.

London HousesWhile funding has now become easier to secure and confidence has returned to the market, international investment is still beneficial in supporting larger scale developments by creating cash flows and lowering financial risks.

Professor Whitehead will say: “Concerns that international money pushes up demand and prices for homes in the capital, putting homes out of the reach of ordinary Londoners, are –  outside central London –  largely misplaced. The evidence is that there have been big effects at the most expensive end of the market but that international money is involved in only around 7 per cent of transactions across London. Unhappily there are many other more important factors, notably continuing poor supply, that make London’s housing system increasingly dysfunctional.”

Furthermore Professor Whitehead will say that, outside these very small parts of central London, there are not high levels of vacant homes owned by non UK residents. However, in areas with high vacancy rates reduced demand for local services is seen as a major issue.

Professor Whitehead will also say: “Even though there are benefits to international investment we must work to ensure greater equity between resident and non-resident homebuyers and more fundamentally between the average homeowner and those higher up the housing scale.   For example, tax loopholes that still benefit non-residents should be closed and all properties should be offered on the UK market as well as abroad.

“Local authorities should be encouraged to charge higher council tax on second homes and vacant units whoever owns these properties. Most importantly, council tax bands should be extended upwards so those living in higher valued dwellings pay far more than they do at the moment.”

The conference ‘Housing in London: Addressing the Supply Crisis’ launches a year-long programme of research and events by LSE London on the Capital’s new housing supply crisis. Issues which will be addressed include planning, land supply and development, improving the renting experience and alternative housing such as co- housing communities.

Posted: Wednesday 17 September, 2014

For more information

Sue Windebank, LSE press office, T: 020 7955 7060, E: s.windebank@lse.ac.uk

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