London: Custom at David Zambra’s upmarket central London shop, once a supplier of stationery to Queen Victoria’s family, has fallen 10 per cent each year since 2009. The British economy is weak and Internet shopping on the rise but he blames super-rich foreign buyers who have snapped up homes in his Belgravia neighbourhood, one of the world’s most affluent, leaving them empty for much of the year.
The wealthy including from the Middle East and Eastern Europe have poured money into luxury properties in places such as Mayfair and Knightsbridge, seen as safe investments during the financial crisis and footholds in a dynamic city. Many are rarely visited by their owners, leaving parts of important economic areas deserted, squeezing local businesses already suffering in tough trading conditions.
The investment has helped estate agents, house sellers and those providing services to the owners when they are in town. But others complain it has pushed up prices, making it harder for locals to buy homes, widening the gap between the richest and poorest in London and damaging the fabric of local communities.
Overseas buyers of high-end London homes accounted for 38 per cent of deals last year compared with 23 per cent in 2005, data from property consultant Savills shows. Just over half were for use as a main home.
The figure for non-British buyers rises to 65 per cent for homes worth more than £5 million ($7.7 million) and 85 per cent for new-build properties in the same price bracket.
Exacerbating the problem for retailers is a surge in the number of conversions of offices into more lucrative residential use, which further cuts passing custom. Figures from property consultant H2SO show a 168 per cent rise in the amount of office floor space lost to residential last year versus 2011.
It has not dented steadily rising sales and footfall in top areas like Oxford Street or Regent Street, which ensures overall vacancy rates in London’s wealthiest postcodes are below the wider averages for the city and rest of the country.
But not far from the bright lights and tourists of these world-famous shopping strips, the outlook is gloomier. Reuters spoke to more than a dozen retailers in such areas across Mayfair, Knightsbridge, Belgravia, Earl’s Court and Kensington and Chelsea who said custom was falling and most expressed concern about the effects of empty homes.
Nainesh Shah, who has worked in Knightsbridge and Belgravia for 32 years began to feel the impact in 2010, when footfall at his newsagent fell by a quarter and sales by over a fifth. “They’re (overseas homeowners) not here with the interest of staying and building a relationship,” he said.
Such comments tally with views expressed to the local government in Westminster, an area that includes many of London’s wealthiest streets and accounts for about 3 per cent of national GDP.
“Never mind about buy-to-let property, we are concerned about buy-to-leave,” said Rosemarie MacQueen, an official at Westminster City Council, which commissioned a study to be released later this year examining the impact of a rising number of homes compared with offices and shops. “Given the contribution we (Westminster) make to the country’s GDP we have to be sure about every change of use to residential.”
“They (small businesses) see a rich and affluent neighbourhood and think the success will rub off but that’s simply not the case,” said Jane Morris, managing director of interior design shop Percy Bass in Knightsbridge, less than half a mile from the Harrods department store.
Politicians are taking note of the retailers’ distress, including Simon Hughes, the deputy leader of the Liberal Democrats, the junior party in Britain’s coalition government.
Hughes is lobbying for additional taxes for overseas homebuyers because of the capital’s housing shortage and said local businesses were also under threat. “London is a series of villages and villages to survive need enough customers who go to the village pub, the village shop and the village bakery,” said Hughes.
Developers say politicians are just trying to win votes while ignoring the wider economic benefits of overseas money coming into London.
“These politicians have zero understanding of the London property market and make comments that are damaging and self-serving,” said Alex Michelin, co-founder of high-end residential developer Finchatton, which sells homes worth between 5 and 70 million pounds.
“These guys spend more than the average person spends in a year when they are here, all without using public services. Most world cities would give their left arm to have what London has.”
