How the super-rich are digging down in London

https://www.theguardian.com/money/2018/may/07/pool-basement-wealth-super-rich-digging-down-london

99 82 8 years ago

dijit2• 8 years ago

London, vs the rest of the UK has always been one or two steps (depending on Bath vs Sheffield..) above in absolute terms of "class"/wealth for my entire life, this is just more of the same from that standpoint..

The entropy can only increase and nobody with any modicum of power has any incentive to fix it.

And it's a constant feedback loop because more investment goes to London and therefor it attracts more money and because there's more money it attracts more investment.

From a personal standpoint: I'm an above average earner but my quality of life in London is substantially worse than anywhere else I'd live (probably excluding San Francisco), we're coming towards a time where only the wealthy can live there, and the proles who actually do the hard work (cooking, cleaning, assistants, low-mid level employees) will need to be shuttled in from further afield.

The reason I mention that is because I was nearly paying 1.3k/mo for someones basement room in 2011, that same room is now on the market for twice that, I can't imagine how anyone can be comfortable paying that much for such a basic accommodation.

kokey2• 8 years ago

Purchase prices of London properties rose much faster than rent. That's coming to an end now, there's a finite supply of people who can or will throw silly money at it. It doesn't mean that prices will come down, but it does mean purchase prices won't grow so fast and relentless as it did the past two decades. Rents may rise, but mainly to close the significant gap between rents and mortgage payments and that will only happen as fast as people are willing to pay.

a008t4• 8 years ago

It seems to me that house prices can be approximated as a function of rents, interest rates (determining required return on owning a house), and anticipated growth in house prices (which again can be decomposed into growth in rents, reduction in interest rates and 'irrational' growth).

Rental yields appear to be around 3.5% at the moment, which suggests to me that a good deal of anticipated growth is priced in. But where can that growth come from? Rents are a function of incomes and are unlikely to outpace inflation. Interest rates seem to be more likely to go up than down. So it seems that house prices are unlikely to rise, and once that is realized by the market, prices may even come down as participants stop anticipating growth just because "London house prices always go up".

House prices going up faster than rents in recent decades can probably be explained by interest rates being in a downward trend over the same decades. Now we seem to be in at least somewhat of a bubble due to irrational future growth expectations.

danpalmer2• 8 years ago

I think your example is significantly higher than average. I think £800-1000 per bedroom is standard for relatively nice places in zones 1-3 for 2+ bed places. For single beds it’s a bit higher, but not 2k+ unless you’re in a very fancy place.

dijit2• 8 years ago

Yes, I was referring to Zone 1-2 to be fair, and I understand that being more central is obviously more expensive, but as you move out to the more affordable areas you get locked into public transport. The less options there are for public transport the lower quality of life in general..

mseebach2• 8 years ago

The reason I mention that is because I was nearly paying 1.3k/mo for someones basement room in 2011, that same room is now on the market for twice that, I can't imagine how anyone can be comfortable paying that much for such a basic accommodation.

In 2011 I was paying less than £800/mo for a stunning first floor bedroom in a beautiful Georgian house, 20 minutes south of the square mile where I worked at the time. Today, my wife and I pay a bit less than 2.6k for a large, modern all-round tip-top two bedroom in central Camden - it's a lot of money, for sure, but it's a far cry from someone's basement room.

a008t4• 8 years ago

Are there any particular reasons why you are not buying?

mayniac• 8 years ago

From a personal standpoint: I'm an above average earner but my quality of life in London is substantially worse than anywhere else I'd live (probably excluding San Francisco), we're coming towards a time where only the wealthy can live there, and the proles who actually do the hard work (cooking, cleaning, assistants, low-mid level employees) will need to be shuttled in from further afield.

I absolutely agree. I've personally noticed lots of people getting pushed out further and further due to rising costs of living. The situation we're in seems classist to an ever increasing extent. Directors, managers, people in finance etc all get paid enough to live comfortably, while even skilled workers in essential sectors are often not paid enough to live in a 1 bedroom flat within reasonable commuting distance.

For anyone wondering I did some Googling: average salary for a software developer in London is £43k (£32.6k after tax), and San Francisco is £77k (£52k after tax), about 60% higher. Cost of living in San Francisco is about 15% higher. This doesn't include healthcare or property taxes so take it with a grain of salt.

IMO it's not just rent that needs to go down, salaries need to go up. When I worked in a company that did client facing work they actively tried to hide our billable rates from us because it was so laughably higher than our actual salaries (about 20x, not including tax or huge amounts of unpaid overtime). A lot of people in skilled work are not comfortable with demanding pay rises and moving jobs if they don't get them, and a lot of un-skilled workers are not in the position to make such demands. That needs to change, far too much money gets funnelled not only to c-levels and directors, but out of the country entirely.

bencoder• 8 years ago

salaries need to go up

The UK still seems to have such a classist attitude. Anything 'unskilled' in London is barely above minimum wage, and some people would react in horror if they demanded any more than that.

See also: "How could train drivers strike when they earn 40k+. Nurses don't even earn that" - the problem is that nurses earn too little, not that the drivers earn too much. It sometimes feels like people here would rather pull everyone down to just above subsistence level, rather than supporting everyone doing better.

apexalpha• 8 years ago

For anyone wondering I did some Googling: average salary for a software developer in London is £43k (£32.6k after tax), and San Francisco is £77k (£52k after tax), about 60% higher. Cost of living in San Francisco is about 15% higher. This doesn't include healthcare or property taxes so take it with a grain of salt.

What. 77k? From what I hear on HN here everyone earning less than $150k as a software engineer in the US is selling themselves short.

briga• 8 years ago

I bet it's insanely hard to get approval to build highrise luxury condos in London, especially when to do so you have to tear down historical buildings--and practically every building in Central London is historic. This seems like a sensible, if extravagant solution. I just hope they're considering how underground buildings might affect the structural stability of what's built on top.

theoh2• 8 years ago

Actually, if you've been to central London recently, you'll know there is a huge amount of demolition and rebuilding going on: for example dead center on the west side of Tottenham Court Road. Office buildings in the centre, from the 20s onward, regularly get demolished and rebuilt to modern specs. There are brand new "luxury condos" around Tate Modern and the amount of building going on near Canary Wharf is incredible.

It's true that there are some preserved buildings that are unlikely to be redeveloped. But in the City proper (the square mile) there is a lot of redevelopment. Nobody lives there, though.

The reason for the basements is not that the houses are architecturally noteworthy, just that they are in conservation areas. It has to do with the look of the neighbourhood and all the property value that goes along with that. It's not an effective way of densifying the housing stock.

pledg• 8 years ago

"Nobody lives there, though."

Hello from the Barbican.

cm2187• 8 years ago

No, there are very stric planning rules in London. It’s not just about not touching listed properties (though a lot of the city is listed) but also there is a web of line of sights from different view points which are protected and results in an invisible ceiling to new constructions. Add to that a very lengthy planning process and locals hostile to the densification of the area despite the crumbling transportation system, and you get the current odd situation where most of the city is made of low rise, 2 floors high tiny houses converted into even tinier apartments, and a few spots where you have a massive concentration of some of the highest residential skyscrapers in Europe.

fredley2• 8 years ago

There's a lot of history, but there's also a lot of low-mid rise cheap postwar developments (built on bomb sites) that are overdue for replacement.

mattkevan2• 8 years ago

We live on a long straight road in central London lined with Georgian townhouses. It’s possible to see exactly where the bombs fell as every few hundred yards the houses stop and there’s a 60s tower block or a park.

Never realised why until it was pointed out.

burfog• 8 years ago

I would expect the seriously historic stuff to be underground. That is where the ancient Roman stuff would be best preserved.

I wonder how often an inconvenient archaeological site gets quietly disposed of.

fredley2• 8 years ago

They don't get 'disposed of'. Whenever there are large excavations it's a planning requirement to turn the site over to archaeologists first, who can find anything that's to be found before it's dug out. E.g., there was a lot of archaeology done with the Crossrail project: https://archaeology.crossrail.co.uk/exhibits/roman-moorgate-...

chrisseaton3• 8 years ago

I bet it's insanely hard to get approval to build highrise luxury condos in London

'Condo' isn't really a term we use in London. What's the difference between a condo and an apartment that you own?

markkanof2• 8 years ago

There isn’t any real difference. It is just a difference in wording. Usually in the US we say apartment to mean a unit in a larger building that you are renting and condo means the same unit but you own it.

gotrecruit• 8 years ago

where i'm from, apartment is usually considered somewhat lower end, it's usually a unit that is fairly standalone in a building, and offers minimal amenities. apartments are not often gated. a condo is usually gated, with a human concierge or security guard, with much more luxurious amenities such as a nice pool and fitness centre.

cimmanom• 8 years ago

Condo is one sort of ownership structure in a multi-unit building. I imagine there are more than two, but co-op is the other structure that I'm familiar with.

"Condominium" also implies luxury (and especially new) apartments rather than mid-level or down market or generally older units.

pcrh• 8 years ago

"Condo" stands for 'condominium", i.e. the building is mutually owned.

In the UK it would be the equivalent of each flat owner owning a part of the freehold for the building. So in a condo all owners are mutually responsible for the upkeep of the building as whole.

An "apartment" is a flat, it could also be in a "condo", in theory, but is generally used to refer to rented flats.

gwbas1c• 8 years ago

I read through some of the replies and they miss the point: "Condo" signifies wealth in American terms. When you say you live in a condo, it's a very subtle indication of your social and economic status.

danburbridge• 8 years ago

I am sure I remember reading reports a few years ago where there excavation has caused serious issues/subsidence and even collapse.

mattkevan2• 8 years ago

There’s always the Mole Man of Hackney who spent 40 years digging tunnels under his house. He dug so much that the pavement outside collapsed.

https://www.theguardian.com/society/2006/aug/08/communities....

angarg12• 8 years ago

At the same time some properties are being held purely for speculative reasons and going derelict. I would much rather have a new construction rather than a rotting 'historic' building.

Point in case: The luxury Principal Tower [1] and buildings just across it [2].

[1] https://www.google.co.uk/maps/@51.5213362,-0.0786701,3a,75y,...

[2] https://www.google.co.uk/maps/@51.5213362,-0.0786701,3a,75y,...

Sabinus• 8 years ago

Time for some taxes on foreign property ownership or uninhabited buildings then.

Balgair• 8 years ago

https://www.youtube.com/watch?v=AGXbiSwcqtM

Tom Scott on the 'Protected Views' or 'Sightlines' of London. It explains some of the legal issues about heights in London.

TLDW (even though is 3 frickin min. long): You have to be able to see St. Paul's (and have nothing behind it) from a few special vantage points. Something he didn't mention is the issues about London vs. The City of London, which also affects building heights, though less so.

baud147258• 8 years ago

Regarding limited building height in a capital city, my brother worked on a refection/reconstruction project in Paris (just next to the local Google office, near St-Lazare train station). They removed all the insid of the building, but they left the roof in place, because if they removed it to rebuild it, they would have to rebuild it lower (3 meters I think).

kokey2• 8 years ago

The photo at the top of the article is bizarre, especially with the caption of the property having a dance floor and a DJ while in the photo there is also a pram.

extra88• 8 years ago

This video from 2015 about the subject is interesting.

https://www.youtube.com/watch?v=sLJ0zZQb9x0

vowelless• 8 years ago

There is a lot of Khaleeji wealth in London and they are not shy about showing it off (the "super cars" with Saudi plates, for example). They own a lot of property around the city.

markkanof2• 8 years ago

Is it legal to drive with the Saudi plates or is it just that no one wants to stick their neck out to enforce the laws for rich people?

achamayou• 8 years ago

In short, it's legal as long as it's somewhat temporary (ie. less than 6 months).

Full details: https://www.gov.uk/importing-vehicles-into-the-uk/temporary-...

dogma11383• 8 years ago

It’s legal they fly their cars on special jets the summer period around my flat is irritating as hell and I’m not even getting the brunt of it they other side of the park around Knightsbridge is a nightmare.

What’s worse is that many of them have diplomatic immunity which means that when they get involved in an accident there is fuck all you can do about it including being unable to claim compensation for the damage they cause.

walrus01• 8 years ago

to the best of my understanding it's legal to drive around the UK with foreign plates for up to 6 months, provided that the full value of your car is held in bond by a carnet de passage. if you're a rich gulf state resident you'll have no problem with a $300,000 carnet.

Lio2• 8 years ago

There’s lots of weird rich people faulting their wealth in certain parts of London.

The photographer Dougie Wallace is well known for documenting some of it in his Harrodsburg work.

http://www.dougiewallace.com/harrodsburg

cup-of-tea• 8 years ago

I can't help but think of Trantor from Asimov's stories. We're at the stage where London is like a mini Trantor. It seems inevitable that if we were to colonise other worlds there would eventually be a Trantor.

jpatokal• 8 years ago

I recommend visiting Tokyo. The view from the observation dock atop the Tokyo Metropolitan Government Building is essentially just concrete extending in all directions as far as the eye can see:

https://cdn.theculturetrip.com/wp-content/uploads/2017/10/15...

joshvm• 8 years ago

Clive James, in 2009, recorded an amusing piece about this on BBC Point of View. Basements in London are nothing new, and this was before the boroughs started cracking down.

https://soundcloud.com/pointofview-clivejames/london-undergr...

lifeisstillgood• 8 years ago

90 Billion a year of dirty laundered money goes through the UK - mostly into the (London) property market - and stopping that flow is likely to cause a housing collapse

I really recommend Ed Milibands podcast "reasons to be cheerful" - the above fun fact came from the episode on money laundering. It is a hell of a surprise to find out how easily we could stop the dirty money - and how close we came. Another thing brexit scupperdd

beebmam• 8 years ago

It's the same in the west coast of the US. An absurd amount of money laundering is going on and its exacerbating the housing crisis here.

ars• 8 years ago

This is the best part:

https://www.newstatesman.com/business/2014/06/bizarre-secret...

Previous: https://news.ycombinator.com/item?id=7862870

clintcparker• 8 years ago

Also reminds me of this: http://www.newyorker.com/magazine/2015/06/01/house-of-secret...

collyw• 8 years ago

An artificial beach sounds like far more money than sense if it underground.

smithmayowa• 8 years ago

How does someone become super rich any way

How the super-rich are digging down in London

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