The problem of homes being left empty often comes up when people talk about the ‘housing crisis’, particularly in London.
People often link empty homes to a growing trend in property investment from overseas. But what’s the real scale of these issues? And are they even related?
In this blog post we look at what we know about overseas buyers and empty homes…
How much property is being bought by overseas buyers?
The short answer is that we don’t really know. Research has estimated the scale of investment, but it’s tended to be London-centric.
Estate agency group Savills has estimated that 7% of sales in Greater London went to overseas buyers in 2013-14, although this rose to 32% for prime areas.
But they point out a problem with these figures: London is a diverse city, and plenty of buyers are ‘from’ overseas but buying in London as a place to live long-term. According to their estimate, nearly two-thirds of overseas buyers fall into this category.
The Mayor of London announced an inquiry into foreign investment in London housing in September 2016, resulting in research papers from the University of York and LSE.
The University of York report took a different approach to defining overseas buyers. They used correspondence addresses from Land Registry sales records to see how many new-build homes were being bought from overseas.
They found that 13% of new-build properties sold in London between 2014 and 2016 went to overseas buyers. Again, this figure was higher in prime areas: 32% across Westminster, the City and Kensington & Chelsea.
The Land Registry’s data still leaves things a bit murky, though. A British expat buying property in the UK is an ‘overseas buyer’ by their correspondence address, as is a UK resident buying via an overseas company. And to complicate things further, some overseas residents might buy property via a UK-based address if they have one.
So now we have a rough idea of the scale of overseas investment in London’s residential market. It’s perhaps a third of upmarket properties, but quite a bit less across London as a whole. But how many are being left empty?
How many empty homes are there?
Tracking the usage of a home is tricky, but local authorities can collect some information for council tax purposes. According to estimates based on local authorities’ records, there were about 590,000 empty homes in England in October 2016. About 200,000 of these were long-term vacant.
Taken as a percentage of total housing stock, vacancy is more common in the North than in London: 3.4% of homes in the North East were empty compared to 1.7% in London.
But empty homes were enough of an issue in the London Borough of Kensington and Chelsea that the local authority did research of their own in July 2015. Using their own council tax data, they found more empty homes in the more affluent wards in the south-east of the borough, including some that had been vacant for ten years or more.
Local authority estimates aren’t perfect. After Kensington and Chelsea accidentally leaked the address details of empty home owners to the Guardian, the paper did some door-knocking and found some people answering the doors of properties that were recorded as empty.
And nor does the data tell us whether the property is owned by someone who lives overseas.
Other ways of finding out whether a home is being lived in
Other data attached to an address gives clues about whether it’s being lived in: things like the electoral roll, GP registrations, and commercial data.
The University of York research on overseas buyers tried to match administrative and commercial data to Land Registry records. They found low levels of matching in all the areas they sampled, although matching was a bit worse in prime central London areas and in homes bought from overseas. This implies that those homes were more likely to be left empty, but it’s hard to say how much so with any accuracy.
The LSE research that contributed to the same project relied on qualitative research to find out whether overseas investors were likely to leave homes empty.
They interviewed estate agencies, developers and even concierges in new developments. They concluded that most overseas purchases are rented out, although purchases for family members or use as a second home are also common.
The trouble with these alternative sources is that they don’t give us a complete picture. The York and LSE researchers acknowledge this, though it hasn’t prevented criticism of their work. Administrative data is unreliable, and interviews can only tell us what people who work in the industry think is happening.
So what do we know?
We know that overseas investment is more common in some upmarket parts of London, and there’s evidence that homes are more likely to be left empty in those areas, too. But we don’t yet have enough data to fully understand the extent of either of these issues or how much they overlap with each other.