The Lib Dem deputy leader Simon Hughes had discussed plans to limit foreign investment into London’s new developments, forcing developers to sell property to the UK local market unless it is for a permanent home.
But a spokesman for Prisk’s office responded: “Mark Prisk has no plans to do anything that would curtail inward investment including restricting market to the UK or giving local residents priority for sales.”
Research from the London Central Portfolio, the residential fund and asset management company, showed there are 83,250 new build units in inner London’s pipeline.
These properties, when sold, are expected to bring in £2.8bn to the national tax coffers through VAT and Stamp Duty Land Tax whilst injecting an additional £5.2bn into the UK economy.
LCP’s research revealed that 44% of London’s new builds, 36,630 new apartments, will be bought by buy-to-let investors over the next few years which is estimated to bring £4.3bn into the economy.
LCP is against Hughes’ plan because it said the government “simply” cannot afford to ignore the revenue the private rented sector generates which depends on foreign investment.
Naomi Heaton, chief executive of LCP, said: “The private rented sector fulfils an important requirement within the city. It provides housing for international students, foreign visitors and corporate executives - all sectors the government is actively promoting.
“Not only this but with no private rented sector the contemporaries of Prince George of Cambridge will no longer be ‘generation rent’ but rather ‘generation live-at-home’.”
Whilst LCP recognised the need to address the housing crisis it said marketing these developments to the UK only, or to the locals first, will not solve the housing problem.
LCP’s analysis showed that the average price of London new builds now lies at £820 per square foot.
Based on an average salary of £32,000, LCP concluded that Londoners could not afford these premium-priced developments moving the government to force developers to slash prices.
LCP’s calculations showed that values would have to fall by 54% to match the price-to-income ratio of the rest of the country.
The findings predict that should Hughes’ views be implemented prices will plummet, UK owner occupiers will become the majority buyers and many jobs reliant on a healthy property market will suffer.
The result could see £1.9bn wiped off the Exchequer’s balance sheet with an additional £3.7bn being forfeited by the general economy equivalent to 28,000 jobs spanning from London-based professionals to nationally-based manufacturers.
Heaton said: “The price of older properties would also have to take a haircut to remain competitive with new-builds. In a repeat of the 1980s crash this would result in widespread negative equity with devastating consequences when base rates inevitably increase.”
Heaton added: “We are delighted by Mark Prisk’s response. Clearly however the views vocalised by Simon Hughes are still a major concern. This issue needs to be thoroughly debated and supported by competent and numerate statistical analysis as to the implications for the economy and the housing sector.”
