Housing: foreign investors head to Birmingham
A report in The Times on July 8 described the rush of foreign capital into Birmingham’s housing market. With cheap, cramped and ugly apartments flying up across the city, it is clear that there is money to be made.
Birmingham reportedly has the youngest population of any city in Europe, is now the most popular destination for those escaping from London and stands to benefit from even better rail links to the Capital once HS2 is completed (journey times of 1hr 15mins are already available on some services). Furthermore, with house prices a fraction of those in London it is easy to understand why workers from the south are looking to cash in and buy in Birmingham, and other poorer workers merely escape to cheaper rents in the West Midlands.
“While London and Manchester were previously the prime targets for foreign investors there has been a surge in interest in Birmingham, with overseas buyers snapping up as many as 100 flats each in new developments.
As well as the promise of huge yields renting to young people, investors are being lured by glossy brochures boasting that Birmingham is “one of the greenest [cities] in the UK” has “more miles of canals than Venice” and is home to the “iconic” Bullring. Another developer, whose conversion of a factory in the trendy Digbeth area is being marketed in Hong Kong, promises almost guaranteed rental income.
Seven Capital, which is behind numerous developments in the city, is telling investors that demand from tenants is so high that some properties are being let on the same day they are purchased.”[i]
The Times, which is not well known for being concerned with the prospects of ordinary working-class people reported that,
“Chloe Thorn, 26, has been saving for a deposit to buy a flat in Birmingham since she was 16. But when she began putting offers in she found that minimum deposits were either out of reach or flats were marked as investment-only. “It’s like being priced out of the city I’ve grown up in,” she added. “I remember when I first started looking in 2017 and seeing all these new buildings being built and thinking I may stand a chance of buying somewhere in the city once they are done. But once they went online to buy it was all investors-only on the majority.””
Capitalism only builds for profit
What Chloe failed to realise is that houses are not built so that working people can have a nice place to live, to bring up children and start a family. Under capitalism flats and houses are built so that they can be sold for a profit. Under capitalism, commodities (houses, cars, food, video games) are produced so that they can be sold on the market, they are not sold at their value, they will be sold for as much as the seller can persuade somebody to part with. Capitalism does not work for ordinary working people.
Housing under capitalism has become a vehicle for the wealthy to invest money in. The influx of foreign capital into housing in Birmingham is a consequence of the lack of better (more lucrative) schemes for the wealthy to invest in, and despite the claims of estate agents in Hong Kong and elsewhere, it is far from certain that investment like this can return the rents which these landlords hope for. Birmingham is a working-class city, more than 100,000 children live in poverty and one in five workers earn less than the Living Wage (£8.25p/h), recent accounts from the city council show that many workers cannot afford to pay their council tax with Birmingham owing £115m in outstanding arrears – not a cast-iron guarantee for great rental incomes.[ii]
Whilst estate agents will say anything to shift overpriced, poor quality housing, it is surprising that there are so many gullible enough to fall for it. Even in London the property bubble is due to pop, and there are already signs that in the highest end of the market the glory days are already over,
“Viewed from Bangalore, the purchase of a newly built three-bedroom apartment in London for more than £1.4m seemed like a safe investment bet. The top-floor three-bedroom home under construction in Keybridge House south of the Thames boasted views of the City of London and the Shard skyscraper. As Shonu Bhandari considered the purchase two years ago, agents told him he could expect the value to rise 15 per cent before the property had even been finished. The Indian entrepreneur, who runs a medical products company, happily signed up to buy. But his purchase soured quickly. When Bhandari approached a mortgage lender, it valued the property not at 15 per cent more than he had agreed to pay — but at 20 per cent less. With completion of the building looming, he signed over the property to a new buyer in March this year for £1.2m, losing more than £200,000 of his deposit.
…One new-build brochure from the estate agent Savills in 2016 said price growth in prime central London was expected to average 21.5 per cent by the end of 2020. Prices have so far fallen 10.4 per cent since that date, according to LonRes, a data provider.
“Global capital entering local real estate markets is not particularly new, but what was new was the intensity with which it entered places like Vancouver, New York, London, Melbourne and Sydney,” says Andy Yan, a planner and academic in Vancouver.”
“…In London, research by Savills shows construction continues to be out of step with demand. The London market over the next five years will need 42,500 new homes a year for sale or rent at cheaper than market rates, the property agency found — but only about 3,500 a year will be built.
Demand also far exceeds supply in the “lower” and “mid” markets, up to £700 per square foot. But above that, planned supply starts to exceed demand. In the £700 to £1,000 a sq ft category, annual demand for 7,000 homes a year will be catered for by almost 10,500. Prices at the top end are falling, but the median London house price remains more than 12 times average earnings. “What we don’t need in London are more £1m-plus apartments with swimming pools, spas, cinema suites and service charges of £7 or £8 a sq ft [per year]. Those are not for normal Londoners,””[iii]
Socialism the only answer
Houses should be homes for people, shelter and a secure family life is a right for every worker. Houses should not, as they are under capitalism, be commodities, sold only to those who can afford to buy or rent them, rather than provided for those who need them. By its utter inability to solve the housing question and meet this basic need of working people, the capitalist system is providing yet more proof that it is well past its use-by date and due for demolition.
The Eighth Congress of the Communist Party (CPGB-ML), held in September 2018, passed a resolution on housing which put forward the basic demands of the Communist Party on the housing question. These demands form the basis of the party work on housing, and should be taken up by all advanced workers:
- Scrap the 2016-17 housing bill:the immediate scrapping of the 2016-17 housing bill, which threatens hundreds of thousands with poverty and homelessness.
- Build council houses not ‘affordable homes’:the provision of at least 300,000 new council houses per year to end the crisis.
- Guarantee secure social housing:guaranteed, secure and well-maintained social housing for all who want it, close to people’s work and families, and the abolition of divisive allocation criteria.
- Council ownership not ALMOs:the return of housing association and ‘non-profit’ properties to council ownership.
- Abolish housing charities:the abolition of housing charities and the reintroduction of the legal right to decent, secure housing for all; slums, overcrowding and homelessness are an indictment on capitalism and a crime against humanity.
- Set a rent cap: the introduction of a rent cap at 20 percent of minimum wage for all privately rented accommodation, and the scrapping of housing benefit (a subsidy to landlords that has helped to fuel rent rises).
- Protect existing council housing:the scrapping of all schemes that fuel prices, create shortages and offer subsidies to landlords and developers.
- Use existing surplus housing stock:the confiscation of all surplus homes and unfinished developments and their transformation into council housing.
- Provide decent homes for all:the establishment of residents’ management committees to oversee planning and maintenance and ensure that all workers have access to adequate space, necessary amenities and decent facilities, including having usable and pleasant outdoor spaces and community halls.
[ii] https://birminghamworker.org/2019/06/13/birmingham-council-cash-reserves-increase-by-736/ & https://birminghamworker.org/2019/07/03/thousands-of-birmingham-workers-too-poor-to-pay-their-council-tax/