More Backlash from London’s Empty Towers

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Yves here. I lived for a few months in London in 1984, and spent a fair bit of time in Chelsea near Sloane Square. The last time I visited, a few years ago, it was stunning to see how depopulated it had become. Everything was all tarted up and pristine, with a lack of services that normal people need, like dry cleaners and pharmacies. It felt as if a neutron bomb had cleared out all the residents.

By Leith van Onselen who has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs. You can follow him on Twitter at Originally published at MacroBusiness

I wrote yesterday how the new mayor of London, Sadiq Khan, had spoken-out about foreign investors using homes in London as “gold bricks for investment” following an investigation which found that the UK’s tallest residential skyscraper is now more than 60% foreign-owned and is under-occupied.

Now The Guardian’s Simon Jenkins has followed-up with a piece claiming that London’s empty high-rise is a mark of corruption:

Now we know. The glitzy 50-storey tower that looms over London’s Vauxhall and Pimlico is, as the Guardian revealed yesterday, just a stack of bank deposits. Once dubbed Prescott Tower, after the minister who approved it against all advice, it is virtually empty.

At night, vulgar lighting more suited to a casino cannot conceal the fact that its interior is dark, owned by absent Russians, Nigerians and Chinese. It makes no more contribution to London than a gold bar in a bank vault, but is far more prominent, a great smudge of tainted wealth on the city’s horizon…

In London, property is the most potent lobby…

There was no published plan for the drastic surgery being inflicted on London’s appearance. No limit was set to the towers’ location or height. No one took care of their appearance or bulk, their civic significance or their role in the life of the capital. Some 80% of the approvals were for luxury flats, chiefly marketed as speculations in east Asia…

This bubble simply has to burst. The waste of building resources, energy and space, the sheer market-wrecking bad planning, beggars belief…

In London, as the Guardian shows, these buildings have nothing to do with housing supply, let alone low-cost supply… They are the product of speculative flows of often “dodgy” cash, seeking an unregulated property market that asks no questions and seeks a quick profit. That is all…

Replace “London” with “Melbourne”, and “80% of the approvals were for luxury flats” with “80% of the approvals were for shoe-box apartments” and the article would make nearly as much sense.

Again, if you have not done so already, make sure that you check-out the below video from Four Corner’s recent Home Truth’s special report, featuring Prosper Australia president, Catherine Cashmore, taking reporter Ben Knight for a tour through largely vacant apartment blocks in Melbourne’s CBD where, at 8pm on a Tuesday night, the lights are off and nobody’s home:

Former Victorian Premier Jeff Kennett also makes an appearance in the video, slamming the high-rise dog boxes proliferating through Melbourne:

“We are still building units that, to be quite honest, you wouldn’t put your dog in. I mean, some of these one bedroom vertical fridges are appalling. And I couldn’t imagine anything worse”…

“I think we are in for a crunch, there’s no doubt about it”…

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  1. cnchal

    . . . This bubble simply has to burst.

    Not until the central banks are curtailed from emitting thin air money. So, no bursting bubble.

    The naked official in China that was in charge of the bullet train development swindled over a billion dollars. When you think of all the Chinese state owned enterprises, and at the top of each one is a swindler that diverts a significant portion of the borrowed money into hard cash that gets turned into real stuff, there is no end to the scam.

    Where can the wage earner in Vancouver, for example, steal tens of millions of dollars to compete with the bidding power of naked officials that need a place to hide?

    1. JEHR

      Right now, professors that want to teach at universities in Vancouver and Toronto cannot afford to pay rents or buy houses as they are too expensive. The professors want the university to built affordable housing for professors that will only be available to those at the university.

      What kind of society are we creating for ourselves when the super rich buy up real estate that Canadians cannot afford?

      1. Left in Wisconsin

        This happens in the U.S. already. I have one friend living in faculty housing at UC Santa Cruz, who would otherwise have been SOL. But the craziest one, from several years back and now undoubtedly much worse, was the story of a friend who had been offered a job at Stanford and the gymnastics that the school was willing to do in order to help him afford to live there – forgiveable loans, no-interest loans, etc., etc., all adding up to well over $1 million in housing assistance. In the end, he decided he couldn’t afford to live there regardless.

        1. Heron

          Yeah, and that’s the whole US real-estate market. Banks continue to hold onto(and expand) their mortgage-scam-attained real-estate holdings from the GFC, purely for their investment value. It’s the worst in the big real estate markets -Las Vegas, New York, San Francisco and LA- but you see this sort of speculation-centric construction and purchasing driving RE prices beyond all reasonable affordability everywhere.

      2. cnchal

        The root cause of the ‘affordability crisis’ is ignored by the Globe & Mail education reporter. Like the elite everywhere else, these special snowflakes want a deal unavailable to the workers that pay the taxes that fund universities.

        Within two years, U of T and the other schools involved in the discussions hope to persuade Ontario’s provincial government to introduce and pass legislation that would enable postsecondary institutions to offer long-term ownership of homes to professors, while barring faculty from selling the properties to anyone but the school. Currently, the maximum number of years for such agreements is 21 years. The group is looking to extend that to 99 years.
        . . . . .
        From Sydney to Oxford, it’s not just retail workers, bus drivers and teachers who are priced out of living where they work, but also university professors and staff.

        What they are not interested in doing is persuading the Ontario government to demand that the money used to bid up housing prices comes from legitimately earned wealth instead of Chinese CCP members that looted state owned enterprises. Heaven forbid, that the elite ever lend a helping hand to those below them.

        No price is too high when paying with loot.

  2. PlutoniumKun

    The thing is, the answer to the problem is really very simple. Its a property tax. It doest have to be punitive, but it does need to be substantial. Let them sit on empty properties if they want, but they at least contribute to the local government coffers. But in a rentier economy, governments will always put property taxes at the very bottom of their priority lists, always opting for consumption or income taxes first. As someone once said, you can tell who really runs a country by looking at who pays least tax.

    London isn’t my favourite city, but parts of it are amazing. I lived there in the late ’90’s, when the first big influx of money became obvious, and lovely places like Hamstead became sort of colonies for corrupt Russians. I thought it was getting bad then, but on subsequent visits I’ve been astonished at the changes, mostly for the worst. As Yves says, places like Chelsea are just plain eerie – almost nobody around, the place denuded of ‘ordinary’ services. The rich tapestry of London really is being torn apart in favour of foreign money. Its an incredibly risky way to run and economy, although I suspect that it is secondary cities for hot money (like Vancouver or Melbourne) that will be most vulnerable if the flows of hot money switch (and one day this is sure to happen).

    1. Felix_47

      That is a really good point. Compare the prices of luxury properties in New Jersey with those of California even considering the weather… is mind boggling. One thought would also to establish these places as the owners legal residence so they can pay income taxes as well. If it is not their legal residence perhaps the tax rate could be even higher. Tax policy, as you point out, tells us how and for whom the government is really being run.

      1. readerOfTeaLeaves

        Until tax havens are exposed as economically and socially toxic, this problem continues to accelerate.
        I’m in the Seattle region, and I predict some kind of social upheaval if the local governments keep bending rules to accommodate development. The move to $15/hour minimum wage is going to be erased by rentier’s creaming off all the income unless the government puts in some much more stringent residence requirements.

        (Also, I hear via friends, Chinese, Koreans and other nationalities want their kids in a US high school so that they are able to apply to a state university as ‘residents’. That’s another whole keg of dynamite waiting to explode.)

    2. Lumpenproletariat

      Property taxes, capital gains taxes, and even a surtax on vacant and/luxury properties. And get rid of any and all loopholes.

      Also reintroduce high quality, high density government housing–Akin to the council houses ditched by Thatcher. But build them with higher quality. Also spend on mass transit. Actually extend transit to cover the entire urban area, and keep the infrastructure in the public domain and cheap to use. Get rid of underemlloyment by spending money kn actual useful thkngs like infrastructure.

      Sounds idealistic, ‘cept these concepts were the reality during the postwar years. Thanks to the impact of Thatcher, Blair and all the other sellouts and billionaire class warriors, London (and most every other supposed glamor city/tax haven/FIRE industry playground) is being suffocated by high living costs and collapsing living standards.

      I should add that government/social housing is widely disparaged as ugly and inefficient, often by people who would themselves benefit from low cost accommodation. This mindset has been carefully nurtured by the real estate and banking industry. The idiots who believe it are truly indulging in a false consciousness.

    3. grayslady

      I’d like to see an energy tax and an infrastructure tax (bringing in city water and sewer lines) as well. Even if unoccupied, there is a minimum temperature required in the winter to keep the pipes from freezing. What a complete waste of resources.

    4. optimader

      governments will always put property taxes at the very bottom of their priority lists
      Certainly not the case where I live.

      1. John Zelnicker

        @optimader – You may both be right. Look at the commercial versus residential property tax assessments and rates. I’ll wager the commercial rates are more favorable than your residential rate, or the assessments are lower relative to the appraisal value.

        Here in Mobile a developer with several acres between a 40-store mall and a Walmart Supercenter, on the interstate service road, had it valued as timberland, which gets a ridiculously low property tax rate in Alabama. For years he was paying less than $5k for land worth millions. He even planted pine trees when the revenue commissioner sued him for higher taxes. She won, but it’s still all about who owns the land and who has the power to influence government. Sorry to say, it ain’t you or me.

        1. different clue

          Is that particular revenue commissioner who sued and won an elected official? If so, re-electing her in her every next election would be a small battle that “you and me” can win on that particular little battlefield.

          If she is appointed, is her appointer an elected person? Perhaps the appointer could run for return to office on the basis of having appointed an appointee who sued and won for more taxes from an undervalued-land holder. That again would be a little battle won on a little battlefield by some particular “yous and meez”.

          1. John Zelnicker

            @different clue – She was elected. Unfortunately, she decided to retire last October as the County Commission was working on combining the offices of the Revenue Commissioner and the License Commissioner.

            Her successor (the former License Commissioner) has had several legal problems, including an indictment for tax evasion with her husband, which was later dropped, and a conviction, under appeal, for violating a privacy law. Like elsewhere, we just can’t seem to get honest people elected around here these days.

        2. optimader


          The median property tax in DuPage County, Illinois is $5,417 per year for a home worth the median value of $316,900. DuPage County collects, on average, 1.71% of a property’s assessed fair market value as property tax.

          DuPage County has one of the highest median property taxes in the United States, and is ranked 27th of the 3143 counties in order of median property taxes

          This ultimately chops up community demographics. Retirees/fixed income people are driven out. The Village I live in has been gentrified -as in original homes, unless they are remarkable are driven down to land value, dozed and replaced with big shacks. A progressively disappearing collective community memory
          The new construction for the most part tend to be bought by the younger high income highlighted hair younger crowd -living off a cash flow or their parents “gift”- . They move in, take a metaphorical sht (vote for every asinine expensive, school district & parks, fire/police referendum) then take a transfer in three years and move out to be replaced with the next “I want to make an impact” type A assht homeowner/parent.

          The commercial property tax are a major disincentive and a significant contributor to having driven manufacturing out of the Chicago area RE space. Industrial infrastructure is being torn down and replaced w/ 250Ksqft -1mmsqft REIT owned warehouse/distribution.

  3. Tiercelet

    Would love to see some in-depth study of similar trends here in NYC. I have been meaning to sit down with census tract records and public records of luxury high rise development in the same neighborhoods and compute just how half-empty the glasses are, but haven’t had the time… Anybody have any links?

    1. vivian

      This post is based on personal observation of my own Manhattan neighborhood. The West Village is seeing something similar which is destroying our neighborhood– the Highline and the Whitney are much touted, but along the Hudson whole new luxury apt blocks are dark at night. My windows overlook a relatively new, large building where the apartments are clearly rented out for short stays, or they are corporate owned and used only occasionally. The doorman confirms that the building has very few full-time residents. At night, the streets are dark, and we have endless banks and designer flagship stores, expensive restaurants but no ordinary businesses and services.

  4. Minnie Mouse

    There stands your empty affordable housing –for free. Just move right in. The absentee landlords will not dare to notice – just make it look occupied.

    1. optimader

      good luck with that. taxes,
      Who picks up utilities building special assessments and association fees in this fantasy world??

    2. clinical wasteman

      That’s exactly what many of us did for years — with an acute sense of social responsibility/good neighborliness, it so happens — but then they made it a criminal offence.
      (Incidentally, all the lights went out in my fully legally slumlorded building at the moment of posting. Compliance is a wonderful thing.)

    1. Lumpenproletariat

      Cause they don’t have to. Why would they allow the masses to sully their trophy properties when the properties are used as a safe investment and potential capital gains?

      They’ll rent out slum apartments, and those provide a much healthier rate of return.

      1. different clue

        One wonders if there is a way to air-sprinkle pigeon food on the roofs of all these fancy empty buildings. A little pigeon food on the roof every day . . more and more and more . . . adding up to thousands of tons of pigeon food on all these roofs. Millions of pigeons eating and roosting and shitting on all these buildings.

        And why not stealth-dump cumulatively vast amounts of rat-food on the grounds between/among all these buildings? Rats have strong little jaws and teeth. Over time the rats could begin gnawing their way into these buildings . . . here and there . . . millions of rats living in the buildings with millions of pigeons shitting on the roofs.

    2. jrs

      Because being a landlord actually involves work. Landlords are very low scale rentiers they still have to maintain or more often hire out to maintain their properties and take risk on renters.

  5. ke

    The Empire State Building exponentially multiplied. And the edifice of smart infrastructure collapses.

    Once you see that energy is information, you see how ignorant humanity is, and any false assumption in the empire becomes an exit. All Tesla did was open up the spectrum for input, and scared the he’ll out the establishment, which has been shorting shorts with debt as money ever since.

    Whether wheat serves humanity or vice versa is a matter of perspective.

    1. ke

      There are some seasoned, rotten, white male, NAZI programmers out there still resisting change, my counterpart, me in a different time, there are in all walks of life. As a young woman just beginning to get her head beyond the black hole we have been describing for 8 years, in symptom and AI algorithm, looking at the pit in which they have captured themselves. And you are along side some seasoned, rotten females, blacks, Chinese, whatever NAZI programmers ready to take their place. You are severely outnumbered. Be afraid, b err very afraid, NOT.

      “Nuclear” reproduction has never been beat, because it has every genetic advantage, as a multigenerational feedback loop. It’s like the Ovul and the Ovary. You don’t want your opposite or your like; you want your compliment as your spouse, two NOT(S) forming a double sided mirror, protecting your seed future from your form past, because only your own can sell you out at the kernel.

      And your children are money in the bank, because no matter what the bank digitized in a failed attempt to maintain the sunk cost smart infrastructure, a false assumption black hole, your children will be able to discount at will. But don’t forget, it takes all kinds, in their own distribution. Wavelength or frequency, life is choices, but you don’t have to repeat the past.

      Equality is preparation meeting chance:

      What few kernels remaining, I give to you. The clock compiles, with Archimedes Energy Screws, in phased dimensions. The future is in front of you, not the empire in the rear view mirror. The black hole ignites itself, when you set the gap correctly across the (NOT,NOT) tap in your dimension. You have the false choice narrative, you and the environment. Stack the spring, heap the direction and time the jump.

        1. Yata

          Please post when you are sober, or not high.

          That helps. I had spent twenty minutes the other day trying to decipher what I thought might have been some cryptic genius.
          I could safely assume this is NOT NOT any information ?

      1. Ishmael

        A glance through the comments and as soon as I come across one where I say WTF I look at the name and it is always ke! It just types nonsense. I see ke and skip on down!

  6. Ed

    “The last time I visited, a few years ago, it was stunning to see how depopulated it had become. Everything was all tarted up and pristine, with a lack of services that normal people need, like dry cleaners and pharmacies. ”

    I’ve been in neighborhoods in Manhattan like this. However, I agree that London is worse. Hyper-gentrification is slowly but surely killing the cities. Its much worse than the 70s crime boom.

    1. sd

      Something strange is happening in Los Angeles. Prices on both rentals and SFH for sale have skyrocketed irregardless of neighborhood. I don’t know where the money tree is that pays for everything.

      The pull out real estate section of the weekend issue of the LA Times is comedy gold.

        1. nowhere

          You don’t get low down payments with skyrocketing prices.

          It is interesting that the whole country seems to be experiencing the same phenomenon. It’s almost like it’s planned or something…

      1. nothing but the truth

        we have seen the govt lie in every area that it can to get an advantage for itself or its cronies or employees.

        but when it comes to inflation numbers …. nooooo….. we have to trust them … when the raw data is “secret” and there cannot be any verification.

        a loaf of bread that was 1.50 is now 3$ at the walmart and we are going hysterical over deflation.

        this is what happens when you fight deflation that is a lie.

  7. optimader

    Ultimately that sort of development extinguishes the charm of what gave fill in blank: (London) it’s intrinsic charm and consequent value.
    As well It reshores virtual money and extinguishes it when the value “disappears” in the next RE bubble burst.
    London is very much a different place than I remember from the 80s early 90s. Climate as well. Pretty much just an unpleasant point of transit (Heathrow) anymore.

  8. Jess

    We all know that London is becoming unaffordable for many to live, but can anybody clue me in about the cost to visit? What’s been the effect on hotels. esp. during the high-volume tourist times like the summer? Can a tourist still visit, stay in a decent place, see the sights, and not have to rob a bank first to pay for the trip?

  9. MyLessThanPrimeBeef

    All these homes, homes, and not a house for the poor.

    It’s like France in the late 1800’s – all the cakes for the rich, but none for starving peasants.

    1. Brooklin Bridge

      As idle as a concrete slab
      Upon a concrete ocean.”

      “Homes, Homes, everywhere,
      a vision as from Hell,
      Homes, Homes, everywhere,
      yet none in which to dwell.”

      1. different clue

        I am so presumptious as to suggest a slight change to see if it scans better . . .


        ” Houses, houses everywhere,
        a vision as from Hell.
        Houses, houses everywhere,
        yet none in which to dwell.”

          1. different clue

            You are welcome.

            And in case or someone you know ever wants to write a poem entitled Rhyme of the Ancient Codewriter, here is a stanza which occurred to me . . .

            . . . Data, data everywhere,
            and all the brains did shrink.
            Data, data everywhere,
            nor any thought to think.

  10. Rojo

    This is a problem in SF as well. AirBnB is part of the problem as well. I know bar owners in certain parts of town who complain that there not getting any business. There’s nobody in the neighborhood mid-week.

    Property in places like SF, NY, London, etc….are too good of an investment. Year-over-year returns better than equities, but the safety of a government bond.

  11. ibison

    If higher property taxes make investment in unoccupied real estate less attractive, presumably this means that they are a damper on the (boom bust) price cycle. This could be checked by comparing the magnitude of fall in real estate prices susequent to the 2008 crash between states with varying property tax rates. EG NJ & TX (rates ~ 2%) versus CA (~ 1%).

  12. Yata

    The vacancy rates are noteworthy in my fair city – residential and commercial alike – leaving me wondering how this actually works. Left to my own suppositions the dominant theory in my mind is the house will bankroll whichever table is attracting the most gamblers.
    So if it’s likely past the rumor stage that banks are issuing considerable forebearance in NPLs across the HY energy markets they likely wouldn’t be able to weather the added strain of a downturn in the commercial and residential mortgage market. The occupancy ratios, that are plainly visible, are a head-scratcher. I don’t understand enough about RE to conclude how this is viable, in a fundamental sense. One bit of information that stood out was the definition of CMBS.
    They roughly explain that it can be a source of liquidity for RE investors, and lenders, alike.
    So you can kinda’ see how that would work out if RE valuations kept rising.

  13. Synoia

    Interesting topic, and I’ll propose a solution:

    Empower the local government to take empty dwellings (It already has that power for abandoned or blighted properties), and place them on the rental market. Have to local government declare empty dwelling a blight.

    One needs to adjust the legal definition of “abandoned or blight”.

    For example: Vacant for 9 months in a row, or vacant 90% of a specified period constitutes abandoned.

    Or economic Blight: Owners not contributing to the local economy, that is: spending other than taxes.

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