On Christmas Day, 2013, the author attended the short morning service at a small and very multi-racial, vibrantly non-conformist church in the billionaire's enclave of Virginia Water, in Surrey. None of the congregation seemed to be billionaires, and the basic village businesses near the Church were in slightly dilapidated buildings, largely from the sixties and seventies. All around the wider area, though, comfortable 1920s and 1930s English houses with decent-sized gardens had been bought up, demolished and replaced by glittering mansions, usually with at least an underground car-park and often a multi-floor basement containing extensive leisure facilities. Almost all, if not completely all, of the property investors commissioning such works are foreign nationals, or offshore trusts or shell companies, all of which seem to indicate ultimate foreign ownership, by persons who require several layers of shielding between their finances and any light of day.
With all this prosperity and "investment" of billions of pounds on luxury housing going on all around, why did the basic shops and amenities around the Church look so down at heel? There were some boutique-style shops around somewhere, but the local retail economy did not approach that of Beverley Hills, though the apparent net worth of the mansion owners in the area would appear to be a high multiple of the net worth of Beverley Hills, if not the whole state of California. There was utterly incalculable wealth, but less apparent local prosperity than might be found in Leighton Buzzard in Bedfordshire, or Leeds in Yorkshire. At some point I asked what turned out to be the crucial question: "How many people live in all these mansions?" to which, the reply was "almost nobody lives in them, though that one on the corner isn't quite so bad because the owner does come and have a dinner party in it almost every month." It quickly became apparent that, despite the expenditure of several billions of pounds on packing mansions onto the plots of former middle class family homes, often by sinking three or four stories into the ground first and then balancing a two-storey mansion on top, the local economy was operating at a tickover compared to when the ordinary middle class homes had been lived in, by well-off but not wildly-wealthy ordinary middle class families. The multi-racial non-conformists had a church in the billionaire's enclave, because it had been unwanted and available when they were looking for a home. Most of the worshipers lived in other villages and towns nearby. But they were the only real sign of life in what, in the eyes of the UK's government and our political elite, is the runaway success story of Virginia Water, because so much money has been invested and, frankly, buried in the ground. Quite possibly never to be seen, or used, again.
In the Hampstead area of North London, the most exclusive of many billionaire's rows in modern Britain is Bishops Avenue. There are sixty-six mansions there, many of which are, or were, fairly tacky 1930s equivalents of the modern Virginia Water mansions, built on the sites of 19th century houses of much greater architectural worth. Of those sixty-six mansions, only three are currently believed to be fully occupied and at least sixteen are derelict having been empty for decades. See Daily Mail article here. The thirties do seem to have been when the rot set in for Bishop's Avenue, in the sense of millionaire tat replacing genuine quality, but the practice of buying or building mansions there and then abandoning them to literally rot, seems to have started in the post war period.
In the past few years, the majority of non-social new-build apartments in London have been sold overseas without even being advertised for sale in Britain. Ministers have been proud of the fact that 100,000 homes had been built and sold in the past year, but are completely silent on the issue of how many of them were sold or rented to British residents, or even new immigrants, and how many are in the hands of overseas investors who scarcely even visit Britain, let alone reside here. Since whole apartment blocks have all been sold out, often being completely sold out "off plan", and yet remain silent and largely unlit at night, it would appear that the majority of new apartment homes in London are not even making it as far as the overgeared "buy to let" market that would have snapped them up back in the nineties. They have been bought, from brand new, to rot. Meanwhile, the effect on local retail businesses and amenities is even more marked than in Virginia Water: they close, because there is no-one there. This is the real reason why property developers either fight tooth and nail, or exercise considerable guile, to avoid their "section 106" planning obligations to provide infrastructure and amenities to support their large "residential" developments, because they know from the outset that there will be no residents in the foreseeable future.
Even if this didn't pose an economic danger to Britain and even if it wasn't worsening an acute social problem of housing affordability and availability, the waste of space, energy and resources would be grossly offensive. Since it does pose a grave economic threat and the affront to those struggling to buy, rent, or find these homes advertised for the likes of them to even aspire to, is almost off the scale, there's a imminent threat to social order inherent in all this, let alone a threat to social and economic mobility. It is a catastrophe, perceived as success in the minds of our ruling elite, those minds being as far from the reality of our everyday existence as the sands of Mars.
And then, earlier this week, the BBC's Robert Peston published an article and broadcast a film, about the economic and social situation in China. And the film in particular rang a deep resounding bell with all of the problems noted above, approximately once for every minute of screen time.
To take just a couple of examples:
To begin with, the boom in construction projects in China was sustained by the Communist Central Government's directive to the banks that they should lend freely. When that lending rose to dangerous levels, the central government directed that the banks should back off a bit, for the general good. But regional and city governments had become dependent on the gravy train of massive residential development and white elephant projects (there are dozens of HS2-type railway projects instead of just the one we have in Britain) to keep their supporters sweet and stay in power, so regional and city governments promptly created "shadow" banks to keep the credit boom rolling. Now the credit boom was not only out of the control of the Communist Central Government; Beijing no longer even has any reliable information on how big the credit boom actually is. Things are not exactly the same in the other Asian superpower, India. But there are equivalent very bad ideas at work. And in other major Asian powers as well. Casino economies in five or six different flavours. And because officials in positions of public trust should not be lapping up quite so much gravy in any of the major Asian powers, their share has to be hidden and not just "invested". Hello, Virginia Water! Perhaps that's why, in leafy Surrey and even in Park Lane in the middle of London, every Millionaire or Billionaire's home now has to be made into a concrete iceberg, with more floor space below ground than above: the wealth mustn't be too visible, don't you know. What happens when the current once in 250 year groundwater levels seen all around London, work their way through the clay to the centre, isn't yet clear, but one way or another, it will become clear by the end of 2014. At least their billions of pounds of "investment" has made space for billions of gallons of excess groundwater. The most expensive drainage sumps in human history.
Then, paradoxically, there is the issue of unoccupied property. This was highlighted in Mr Peston's film, but seems not to have made the cut in his webpage article. In short, one Chinese expert stated, with some authority, that despite China's huge population, massive internal migration and widespread aspiration towards better standards of housing than previous generations enjoyed, something like 15% of residential property in China is unoccupied, and the rate of occupancy is lowest where the market value is highest. Remember Bishop's Avenue, the most exclusive address of all, with just three out of sixty-six properties enjoying full-time residency and sixteen of them actually falling down?
(The author wouldn't be surprised if the true unoccupancy rate for British residential property proved close to 15%, too. Certainly, there were known to be 800,000 empty homes in the country about five years ago, since when officialdom has tried not to let us have a reliable figure. But with a building rate of 100,000 homes a year and in some areas whole developments of that being sold into complete unoccupancy, the empty home figure, were it known, is bound to be on the rise.)
Britain's political elite are snugly certain that it is absurd to worry about all this: never mind where the money came from, and what problems and risks it leaves behind in its country of origin: it is being invested here, so that's fine.
But it isn't being invested. The people who have sent this money here, are doing two things with it, and neither of them counts as investment:
They are hiding the money, because they broke various laws to get it and they face penalties ranging from public disgrace to a bullet in the back of the neck, or the gallows or a lynch mob, for being seen to have it when the music stops.
Secondly, Chinese "investors" in particular are able to perceive that what they have been doing is to gamble on the Chinese property market with false credit raised through the unregulated shadow banks. And their solution is a typical gambler's one: they are covering their bets with fresh bets of equal value on the much smaller British property market. The ultimate consequences of that particular attempt at "double or quits" could be dire enough to bring the world to war.
Britain and China, as nations, must agree to blame and punish the property gamblers and willfully complicit property developers for those consequences, and not each other. Or this will indeed all end in mutual hostility, as China and probably other Asian and Middle-Eastern states attempt to recover stolen money from Britain, that has all been sunk in once-glittering assets which are then worth next to nothing.
PS:
The author now has an author's page on Amazon.
To take just a couple of examples:
To begin with, the boom in construction projects in China was sustained by the Communist Central Government's directive to the banks that they should lend freely. When that lending rose to dangerous levels, the central government directed that the banks should back off a bit, for the general good. But regional and city governments had become dependent on the gravy train of massive residential development and white elephant projects (there are dozens of HS2-type railway projects instead of just the one we have in Britain) to keep their supporters sweet and stay in power, so regional and city governments promptly created "shadow" banks to keep the credit boom rolling. Now the credit boom was not only out of the control of the Communist Central Government; Beijing no longer even has any reliable information on how big the credit boom actually is. Things are not exactly the same in the other Asian superpower, India. But there are equivalent very bad ideas at work. And in other major Asian powers as well. Casino economies in five or six different flavours. And because officials in positions of public trust should not be lapping up quite so much gravy in any of the major Asian powers, their share has to be hidden and not just "invested". Hello, Virginia Water! Perhaps that's why, in leafy Surrey and even in Park Lane in the middle of London, every Millionaire or Billionaire's home now has to be made into a concrete iceberg, with more floor space below ground than above: the wealth mustn't be too visible, don't you know. What happens when the current once in 250 year groundwater levels seen all around London, work their way through the clay to the centre, isn't yet clear, but one way or another, it will become clear by the end of 2014. At least their billions of pounds of "investment" has made space for billions of gallons of excess groundwater. The most expensive drainage sumps in human history.
Then, paradoxically, there is the issue of unoccupied property. This was highlighted in Mr Peston's film, but seems not to have made the cut in his webpage article. In short, one Chinese expert stated, with some authority, that despite China's huge population, massive internal migration and widespread aspiration towards better standards of housing than previous generations enjoyed, something like 15% of residential property in China is unoccupied, and the rate of occupancy is lowest where the market value is highest. Remember Bishop's Avenue, the most exclusive address of all, with just three out of sixty-six properties enjoying full-time residency and sixteen of them actually falling down?
(The author wouldn't be surprised if the true unoccupancy rate for British residential property proved close to 15%, too. Certainly, there were known to be 800,000 empty homes in the country about five years ago, since when officialdom has tried not to let us have a reliable figure. But with a building rate of 100,000 homes a year and in some areas whole developments of that being sold into complete unoccupancy, the empty home figure, were it known, is bound to be on the rise.)
Britain's political elite are snugly certain that it is absurd to worry about all this: never mind where the money came from, and what problems and risks it leaves behind in its country of origin: it is being invested here, so that's fine.
But it isn't being invested. The people who have sent this money here, are doing two things with it, and neither of them counts as investment:
They are hiding the money, because they broke various laws to get it and they face penalties ranging from public disgrace to a bullet in the back of the neck, or the gallows or a lynch mob, for being seen to have it when the music stops.
Secondly, Chinese "investors" in particular are able to perceive that what they have been doing is to gamble on the Chinese property market with false credit raised through the unregulated shadow banks. And their solution is a typical gambler's one: they are covering their bets with fresh bets of equal value on the much smaller British property market. The ultimate consequences of that particular attempt at "double or quits" could be dire enough to bring the world to war.
Britain and China, as nations, must agree to blame and punish the property gamblers and willfully complicit property developers for those consequences, and not each other. Or this will indeed all end in mutual hostility, as China and probably other Asian and Middle-Eastern states attempt to recover stolen money from Britain, that has all been sunk in once-glittering assets which are then worth next to nothing.
PS:
The author now has an author's page on Amazon.
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