Should we be morally outraged by the phenomenon called “buy to leave” or should we dismiss it as a tiny if inevitable consequence of a resilient housing market?
Politicians and estate agents use the term for properties bought as assets, intentionally and permanently left unoccupied until they appreciate and are sold at some later date.
With prime London housing prices rising 73 per cent from March 2009 to November 2014, according to Knight Frank, the existence of buy to leave is perhaps unsurprising.
Yet while the capital’s Evening Standard newspaper claims buy to leave is so prolific it has created “ghost towns of the super-rich”, no one knows for sure how big the problem is, and in the absence of any central database the authorities resort to educated guesswork.
Kensington and Chelsea’s Conservative council, for example, has used 2011 Census data to find 9,169 flats and houses classified as vacant — 10.5 per cent of the borough’s total housing stock. The same authority’s 2012 council tax returns show 10,564 empty homes, which is 12.1 per cent of the stock. Some “empties” may be second homes of people living chiefly out of London or out of the UK; some, however, will be intentionally vacant.
Labour-run Islington, a north London borough, has adopted a Supplementary Planning Document requiring all new homes built within its boundaries to be regularly occupied in an attempt to prevent buy to leave.
“New homes have to, at the very least, be lived in. I think that’s a pretty reasonable thing to ask,” says James Murray, the council’s housing spokesman.
One by-product of this debate is the agreement between political opponents that buy to leave is in some way damaging. Conservative Zac Goldsmith and Labour’s Sadiq Khan — the two leading candidates in May’s election for Mayor of London — have both called for the curbing of buy to leave, with Khan specifying that he would use planning powers to restrict it.
Many property industry players appear to agree that it has had a detrimental effect.
“Buy to leave is endemic in prime central London and the new-build sector. [It is] a grave issue in a city where many people are looking for somewhere to live,” says Guy Meacock of Prime Purchase, the buying arm of Savills.
“The more international an area, the more common it is. There’s an arc from Knightsbridge through Belgravia, Mayfair and up as far as St John’s Wood and Hampstead where this has been especially popular,” says Roarie Scarisbrick of Property Vision, a buying agency.
“One Hyde Park must be the most high profile. It’s only 30 per cent occupied at any one time and some of the apartments have never been occupied,” says Mark Parkinson of Middleton Advisors, another buying agency.
The temptation to leave properties empty is enhanced not only by stubbornly low interest rates on traditional savings and investments, but also by relatively poor rental returns for those letting out units with high capital values. Knight Frank claims that gross rental yields in prime central London fell to 2.93 per cent in the second half of 2015, with reduced demand for units from the financial services sector, a key customer. In these circumstances, some investors rely on long-term capital appreciation without the hassle of letting out a property.
The practical effect of buy to leave is not restricted to the night-time phenomenon of blocks of flats with few lights on, however. “I was struck by how shabby Knightsbridge is looking with shops closing down. Now at night it’s a pretty dull place,” says Mark Parkinson.
Buy-to-leave purchasers prefer new-build units in managed blocks but for owner-occupiers in the same buildings, services can be impaired if most properties are empty. “It can really demotivate porters and other service providers if they’re sitting in what is essentially a deserted building all day,” says Jo Eccles of buying company Sourcing Property.
Not every part of the property industry is against buy to leave, however.
I was struck by how shabby Knightsbridge is looking with shops closing down. At night it’s a pretty dull place- Mark Parkinson
In the local consultation surrounding Islington’s anti-buy to leave planning policy — which insisted any new-build unit should not be left empty for more than three months — estate agency Savills registered its concerns “on behalf of a client”.
It said that a consequence of the new rule might be reduced contributions by developers towards more affordable housing. “Our key concerns centred around the ability of investors to secure development finance and for buyers to secure mortgages with such onerous obligations imposed (that is, the three-month vacancy measure),” a Savills spokesperson said. According to the estate agency, buy to leave is a sideshow to the main story: the lack of affordable housing.
Meanwhile, last summer the Canary Wharf Group, embarking on 3,200 new homes plus offices and community facilities in one of London’s two main financial centres, marketed one 345-unit block to “UK-based buyers first”. The group wanted to counter any criticism of allegedly excessive overseas ownership and to counter any portrayal of the scheme as having empty flats.
Those anticipating that buy to leave may have been stopped dead by prime central London’s stark housing slowdown after the late-2014 introduction of higher stamp duty for properties above £937,500 appear to have been proved wrong.
In the year to December 2015 prices in Knightsbridge fell 6.1 per cent, according to Knight Frank. In South Kensington they fell 3.7 per cent and in Chelsea 2.7 per cent.
Yet buy-to-leave purchasers appear more concerned by plummeting oil prices and falling, according to those who help them find London investment properties.
“Investors want a safe haven and real estate in London falls into that category,” says Caspar Harvard-Walls of buying consultancy Black Brick.
As if to prove the point, Sam McArdle, of The Buying Solution, says he has just assisted a Bahraini purchase a £2m home in Chelsea. The client will not be using it, as he prefers hotels during visits to London. “He’s merely seeking market stability — unlike in his home region,” says McArdle.
Is that an outrage given London’s housing shortage, or a logical investment? Perhaps it is both.