From Cllr Robert Davis, Westminster City Council
Yesterday, an independent study examining the impact of the prime residential property market in central London was released into the public domain.
The study was commissioned by Westminster City Council and carried out by Ramidus Consulting Ltd, a leading research company in the property industry. It will be used as part of the evidence base for the council's emerging City Plan and the development of our updated housing policies.
With that in mind, we are taking this opportunity to write to you and highlight what we think this means for us here in Westminster.
The findings of the study provide valuable new information and data to challenge the perception that overseas investors are buying high value properties primarily as an investment, which are then left empty.
Of the sales of +£1million properties in Central London during the 12 months to June 2013, 49% were to overseas buyers. However 72% of those buyers lived and worked in London and the remaining 28% very often rented out the properties. As a result, fewer than 7% of the sales were identified as having been bought by overseas buyers for use as second homes.
Investment in second homes is not a new phenomenon, whether in the capital or elsewhere. It is not surprising that a significant part of this comes from overseas investors, given London's cosmopolitan vibrancy and its position at the heart of a global economy. Advanced sales to overseas buyers have enabled many schemes to begin construction in recent years, with associated delivery of affordable housing, through the use of Section 106 agreements, which has helped Londoners onto the housing ladder. £150m has been secured through agreements with prime housing developments for new affordable housing in Westminster alone.
The report shows that owners of prime residential housing make a substantial contribution to the UK economy. Owners of properties costing more than £5 million contribute at least £2.3 billion a year to the UK economy. The contribution is made through spending in the retail and service sectors, as well as through the employment of staff in high value properties living and spending in the local economy.
The property sector in the Westminster area is already contributing in full to the local and national economy. Westminster yields more Stamp Duty Land Tax than 29 of the largest local authorities in the UK combined. The Government has already introduced a 7% stamp tax on properties costing more than £2million.
The report has a number of interesting conclusions on whether the market for prime residential properties, worth more than £2 million, is driving up costs in Westminster's core housing market. It shows that prime sales are not fuelling prices directly. The number of prime properties is too small to distort the overall housing market. The report also shows that prime market activity responds to global trends – in recent years the number of transactions in this price band has mirrored changes in the price of gold. Prime residential is regarded nationally and internationally as a safe haven for investment whereas the wider property market, particularly in London, responds more to domestic economic factors.
The findings of this study will be of interest for many people living, working, building and investing in Westminster and we have published the full report online at www.westminster.gov.uk/prime-homes-drive-housing-and-economy
Our main priority as a council is to carry on with our housing renewal programme, deliver more affordable homes for central London, and gear our housing and planning policies towards successful economic growth that in turn creates opportunities for the families and individuals in the city.
Cllr Robert Davis DL
Deputy Leader and
Cabinet Member for the Built Environment
Westminster City Council