On February 9 this year, the Chairman of Goldman Sachs Asset Investment Wing wrote an op-ed piece for the Financial Times. Perhaps surprisingly, rather than crowing about the large amounts of capital pouring into the London property market and its super-prime housing markets, he set out to draw attention to recent property intelligence which showed that the small town of Elmbridge in Surrey was now worth as much as the entire residential assets of the city of Glasgow.
Among a series of similarly skewed statistics he raised the question of London’s gains, showing a metropolitan hub that is now breaking away from the rest of the British property market while highlighting the massive disparities between the wealthy and those living elsewhere in the capital and its environs. The reasons for these shifts, notably at a time of austerity, poverty and massive social inequality, can be focused on the function of London’s housing market which has come to be a major recipient of national and global patterns of investment, not always in search of a home to live, but rather a home for money that will dramatically grow in value as more money pours into the market from global sources.
This situation of a fracturing property market and its winners and losers is not only novel, given the observations of many commentators about housing hardship at this time (caps on welfare spending, low levels of house building and record low investment in public housing more generally), but also apparently remarkable given the broader impression that the national housing market is stagnating.
This can be highlighted in data produced by Savills which showed that while the housing in the London borough of Westminster has risen by a staggering 49% over the past five years that of Yorkshire and the Humber has declined by 15%. Not only this but all regions outside London itself have seen real property value decreases since the crash.
What the Sachs chairman was noting is alarm at the massive gains to a city and to a select few who now ride a wave of investment wealth in search of a home to generate further gains. Much of the massive wealth sloshing into London’s housing is driven by the (and I kid you not) relative cheapness of such assets because of the depreciation of the UK pound against other currencies (the Chinese Renminbi has risen 30% against the pound in the past five years while property in the super-prime areas has risen by 25%).
But numerous other factors are in play here, London is seen as doubly safe, a place with a stable financial system and economy to which capital can take shelter from stormier regions globally as well as being a safe city in terms of street and other forms of crime. Similarly the transaction charges on buying and selling property in London are much lower than comparable hot spots like New York or Singapore.
And then we come to the cultural desirability of London as a further factor that drives investment – many buyers from Asia, the middle East, former Russian republics and elsewhere arrive with a cognitive map that is dotted with images of shopping in Harrods, watching Wimbledon or Ascot, an extensive social calendar, and enough clubs and restaurants to last most of a lifetime (and definitely the two weeks that many international buyers reputedly spend in their fleeting home bases).
All of this adds up to a somewhat world-beating locale towards which an apparently unending cascade of wealth is descending, to the delight of property intermediaries (the estate agents and investment advisers) while the unsaid problems generated are much less clear and much less discussed.
Over half of the super-prime market is now owned by foreign wealth, funds and individuals – looking to make money by simply parking it there while stock markets and other forms of investment offer scant reward or sleepless nights. Not only has this show of confidence led to comments about ‘lights out’ super-rich neighbourhoods but also a sense of the dramatic contrast between these empty nests in marked contrast to the desperate position of many other households in the city looking for a home in a costly owner-occupied market which they fear being left behind, holding on by their finger nails in an inflating rental market or excluded from a public housing system that does almost nothing to combat the profound failure of the market to accommodate all in good housing at an affordable price.
So London is not only splitting-off from the rest of the UK economy, it is also internally divided by a superficially cosmopolitanising force of international wealth overlaid on top of the massive housing stress, straining transport infrastructures and massive displacements generated by welfare changes in the housing system for those in need.
Overseeing these massive changes are national and metropolitan governments who see mostly untroubling goodness in the dollars arriving in the capital, a vote of confidence in the city, the bolstering of the prized asset of the bloated financial services sector and the purchasing power and building works of the privileged.
It is into this context that I am leading, with Roger Burrows (Goldsmiths University), a project to interrogate how these injections of capital are changing the city within the super-prime territories (what the socio-demographic profiling company Experian call ‘the Alpha Territory’). We will evaluate a range of propositions around how urban life has been transformed under conditions of rising wealth and inequality. These questions include issues of housing displacement (including that of the wealthy by the super-wealthy), the symbolic transformation of the city (massive high rise and other edifices constructed for investors) and the broader play of life in public spaces within the areas themselves.
It is almost certainly true that debates about wealth in the capital have not been well served by the work of social researchers (the referees of our project proposal to the ESRC asked, were the rich really a problem that needed studying?) – so we have a major opportunity to help fill gaps in public knowledge and to more deeply explore how wealth works in the city and what its broader impacts are. Are the rich wedded to the city or are they footloose global travellers moving between business deals, clubs and hotels? Are they holed-up in fortress homes and gated communities or do they enjoy the anonymity of a relatively safe street life? The answer is we only partially know and, most likely, such answers will need to be nuanced in order to reflect the complexity of these issues.
The freedom of the housing market and entrance of those with resources is in line with free market promotion by government and related agents, but it is also in marked contrast to the diagnosis of problematic migration by traumatised internationals seeking safety and opportunity.
As the work of LSE anthropologist Suzie Hall has indicated, super-diverse areas and street economies in deprived and ethnically mixed areas of London offer massive value and economic resources to the city economy largely unheard in discussions about a finance sector-dependent city.
Curbs on housing benefit expenditure can similarly be contrasted with the laissez-faire attitude of politicians and estate agents who see property investment as an untainted benefit even while ignoring the inter-generational consequences of booming house prices and ripple-effects of price rises more generally.
Even if we recognise these difficulties and contradictions it seems unlikely that political voices will be raised challenging the confidence of investors in the city as London breaks away from the rest of the UK and is internally splintered into places where wealth is parked and other spaces in which opportunity is desperately sought.
This article is part of an editorial partnership between openDemocracy and the Centre for Modern Studies at the University of York. It was funded by the University of York's Pump Priming Fund, the British Academy, and York's Centre for Modern Studies.