Was the poisoning of Alexander Litvinenko just a cover for a nefarious plot to buy up London’s housing market? Well, no, but isn’t it just as ridiculous to suggest super-rich Russians are also to blame for the housing crisis? Underneath the lurid details of plutocratic extravagance, lurks the bitter tongue of old-fashioned xenophobia, writes Mark Cantrell in this article originally published in a 2006 edition of Northern Housing magazine
A spectre is haunting London’s booming property market – the spectre of communism. Or to be more precise, the spectacle of former communists turned plutocratic oligarch.
The men who once ruled the Soviet Union with an iron fist, until Gorbachev’s Glasnost and Perestroika lost them the Cold War, have come back in style and opulence – and they love to flaunt their wealth now that they have joined the international capitalist jet-set.
This might not be so bad, except for the old rivalries and faction fighting the former commissars have carried into their days as business Tsars. Whether a product of business or political rivalry – and the two are never distinct in Russia even by Western standards – the intrigue has led to a burgeoning émigré population in London since 2004.
So, what has this got to do with housing? Nothing at all, except some people are concerned about the effects wealthy Russians are having on the housing market. Media attention has been focused on the melodramatic soap opera that is the death of former KGB agent Alexander Litvinenko, which has opened up the exotic world of New Russia’s business elite. Behind these headlines, however, some media commentators have raised the spectre of wealthy foreigners pricing home-grown money out of the market. It’s just not cricket.
One might expect the former ruling elite of the Soviet Union to show nothing but disregard and disdain for the free market – but not by buying it outright. Anecdotes abound; of Russian oligarchs who don’t even ask the price of a property, but splash out on homes and opulent luxuries with the kind of abandon that would embarrass even a Romanov. Of a swathe of flats bought en masse and knocked into one plush pad, as a little something for the plutocrat about town. Other anecdotes speak of offers that exceed even the asking prices already inflated by today’s housing market, high-class estate agents displaying pages in Cyrillic and whole neighbourhoods alleged to be turning uptown Moskva.
The Russians are not only buying our companies and our football clubs, why they are even buying the roofs from over our heads. Aren’t we supposed to have won the Cold War? So, the word on the street is that the local established wealthy bourgeois in the plush places of Chelsea, Knightsbridge and others are clinging on by their fingertips. Meanwhile, a few rungs beneath the high-end of the property market, the affluent middles classes – not used to feeling the chill winds of stratospheric house prices – are feeling the squeeze. They are unimpressed, as staunch Brits are wont to be.
As the Observer columnist Cristina Odone noted: “For those of us looking for mortgages, a bullish housing market, if unchecked, spells the daunting prospect of a rise in interest rates. Astronomical debts and huge monthly repayments are just the kind of bad news we blame on the wave of wealthy Russian immigrants (just as back in the 70s, we could blame soaring house prices on the Arab influx and their petrodollars). It is the Russians’ wealth and their ever-growing numbers that inflate house prices beyond our means.”
The plutocrat, however, has always bought ‘palaces and purpled ease’, it kind of goes with the job. Some flaunt it more than others, of course, but in today’s gravity-defying, seemingly insane housing market, the activities of the super-rich are allegedly exerting pressure that is artificially levitating the lower market sectors even further. Everyone suffers in other words, not just good old-fashioned Anglo-Saxon lucre.
It’s not just the wealthy Russians coming to town. In years to come, we are warned, we will witness an influx of Chinese and Indian plutocrats as those countries take off economically to rival the old centres of global commercial power in the West. Add to this fat bonuses paid to City executives and we see that the pressure on the high end of the housing market is set to increase.
As Yolande Barnes, director at Savills Research said in regard to the London and South East markets: “We have seen considerable growth in these sectors this year largely fuelled by the buoyant financial markets. With no sign of this weakening combined with the prospect of City bonuses amounting to £8.8 billion by the year-end, there will be plenty of cash for further investment in property. We estimate that £5.5 billion from City bonuses will go into housing at the top end of the market in 2007.”
So, it’s not all the foreign plutocrat’s fault, then? Well, no, but it is always tempting to blame the perennial outsider for intractable problems. The blame game is an age-old tactic. And while it might offer a short-term emotional palliative, it does nothing to make real problems go away. This takes us beyond the somewhat frivolous and voyeuristic commentary on the lifestyles of our Russian friends – to the dark heart of the mutterings over ‘unfair competition’ driving up prices. This is not the ‘politics of envy’, as some might call it, nor is it the ‘politics of social justice’ as still others might say – rather it masks the bitter pill of xenophobia in the saccharine of some good old-fashioned disdain for the wealthy.
This should quell any humour those of us on moderate incomes might feel, as we listen to the whines of the wealthy gazumped by the super-wealthy. For alongside the influx of rich Russians to scare the pinnacles of the housing market, the middle and lower ends also have their immigrant scare stories too. The latter can only be given a spurious legitimacy by the seeming respectability of the former.
The problems inherent in Britain’s housing market are deep-rooted and cause hardship for growing numbers of people. The sad truth is that however much the situation is worsened by the activities of the super-rich, regardless of their nationality, playing the blame game will solve none of the real underlying problems. At the end of the day, as many housing industry figures have said time and again in these pages, it comes down to building more homes: both social and private sector, for rent and for sale.
The region’s average house price is forecast to rise to over £322, 000 in the next five years, according to Oxford Economic Forecasting information published in a report from the southern region of the National Housing Federation. Over 180,000 families are currently on housing waiting lists. In the next two decades, some 37,000 new households will require homes in the region, as economic growth brings in an influx of workers to add to the existing population. In this context, it might be tempting to blame foreigners whether wealthy or not for increasing the competition that pushes up prices even further. Yet, equally so in this context, migrants from English regions coming to work in London and the South East are just as much an immigrant as someone arriving from Eastern Europe.
The blame game of xenophobia can do nothing to address the fundamental problems, but it might distract us from tackling them head on.
This article was first published in Northern Housing magazine, circa November 2006. It was subsequently republished on the Housing Excellence website, 11 December 2006.