Thursday, 13 March 2014

Mayor Boris Johnson, London Real Estate Forum 2013, MIPIM Cannes 2014, Developers 'concordat'

Last summer, London’s Mayor warmly embraced foreign cash investment gushing into London property. In March 2014, the Mayor finally acknowledges a “downside” to such vast capital inflow, writes Paul Coleman.

London Mayor Boris Johnson waves papers signifying his 'concordat'
with property developers at MIPIM 2014

Give 'appease' a chance

Rewind to June 2013.
Inside a big white tent in Berkeley Square.
Delegates perch on show stands at the London Real Estate Forum.
London Mayor Boris Johnson strides to a podium.
Mayoral sermon time, dashed with caper tales and jolly japes.

Johnson flatters an international cluster of property investors, developers and agents. 
He praises them for firing up London’s property boom
Heralds them as “galacticos, real superstars, doing more than any other to drive jobs, growth and recovery in our great city”.

“I was in Abu Dhabi recently and was thrilled to be told by the Sheikhs they recognise me as the de facto ruler of the eighth Emirate,” jokes Johnson.

He welcomes Malaysian investors pouring £1.6 billion into a massive new luxury homes development around Battersea Power Station – “that moldering old hulk most of us only remember from a Pink Floyd album cover”.

Let free market global property investment cash gush into London.
Bring it on, chimes Johnson.

MIPIM Canes 2014
Fast forward to March 2014.
Inside a MIPIM conference hall at Cannes on the French Riviera.
Delegates digest a handsome lunch.
Mayor Johnson shuffles to a podium.

Since LREF 2013, foreign investment inflows in London land and property aggressively intensify the number of Londoners on average and low incomes who simply cannot afford to buy a home in London.

Property prices spike.
Council estates undergo demolition.
Replaced with luxury high-priced housing developments carrying a low quotient of so-called ‘affordable’, part-buy, part-rent homes.
Developers market new homes in marketing suites in Hong Kong, Singapore and Shanghai to cash-rich buyers.
Londoners who can scrape together a deposit – and secure a mortgage from a reluctant market of lenders - often don’t even know these new homes are on offer.
Many more Londoners are simply squeezed out of London – ‘displaced’ from their own city where their families have lived for generations.

On Johnson’s Mayoral watch, Londoners suffer the multiple impacts of London becoming an asset class for speculative investment, where London property mutates from a place to call home into an international reserve currency for global elites.

For Mayor Johnson, this means serious political fallout.
Critics carp Johnson as he ‘faffs around’ to find a practical response to London’s growing housing crisis.
And if Johnson doesn’t meaningfully respond, he faces historical consignment as the ‘Mayor who sold London’ to international property speculators.
And caricature, as a cad bounder with mad hair, who aggravated a housing crisis facing many Londoners. 

Hence, nine months on from LREF and Berkeley Square, ‘Sheikh Boris’ splutters a far less avuncular and platitudinous tune to MIPIM delegates at Cannes, the international real estate show (11-14 March 2014).

Johnson coats the title of his presentation with an academic gloss: ‘Housing in London: Population & the Economy – meeting the challenges of 21st century growth’.
Verbally, Johnson jests about confusion over the true meaning of MIPIM (Le Marché international des Professionnels de L'Immobilier).
He japes: “It’s not ‘May I Push you Into the Mediterranean’ but ‘Making Important Property Investments for Millions of Londoners on Modest Incomes’.

At last, Boris blurts his crux.
His meaningful response.
The Mayor acknowledges the “stupefying torrent” of international capital inflow into London land and property contains “a downside”.

Seriousness replaces the Mayoral smirk.
“London is a finite asset that is in global demand," says Johnson.
“It puts terrific pressure on people living in London and on the domestic property market.
“There is no doubt for millions of people growing up in the city, searching for work, there has never been a more difficult or challenging time to get on the property ladder. Homes people thought they could get six months ago are now moving further out of their reach.

“And many people feel a particular sense of anger about one thing in particular that we can easily tackle – the overseas marketing of new homes in London in swish marketing suites before Londoners even get a chance to know these new homes even exist.
“That can’t be right.
“We want people in great Asian capitals to come to London and invest but we don’t see why they should be able to look at new images of new London properties and take cash out for them ‘off plan’ before Londoners even know about the opportunity.

Paper moon
And, very possibly, due to his fondness for history, Johnson seems highly conscious of the perils of even mildly imitating Prime Minister Neville Chamberlain, who waved a white paper at Heston Aerodrome – signed by Hitler and Chamberlain himself - that signified a policy of appeasement towards Nazi Germany in 1938.
Comparing an inflow into London of speculating property investors and corporate property developers to a planned invasion by a hostile neo-fascist state might seem extreme.
But Johnson himself seems to stumble into such a comparison and says: “So I have in my hand a piece of paper…”
And even waves several pieces in his right hand.
Johnson continues: “This signifies the concordat we have agreed with sixty of London’s leading property developers who have agreed that they will stop any practice of marketing London homes exclusively overseas in advance and they will insist that all such homes are marketed first, or at least, simultaneously, to the London and UK market.
“You can’t say fairer than that, can you?”

Johnson describes this as “a small but important gesture from the property industry”.
But is it canny appeasement or a genuine concession?
How will it be guaranteed?
Will developers and agents create marketing suites in London for new homes?
How anyway can Londoners compete with foreign cash-rich buyers in Abu Dhabi, Dubai and Shanghai?

Johnson says: “I do hope that, given the buoyancy of the London property market, developers will accept that a high quotient of affordable homes on new London developments is only reasonable.”

© Paul Coleman, London Intelligence, March 2014

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