The captain has switched on the seat belt signs …
This familiar announcement is made on many a transatlantic flight. We are warned of a little turbulence, told to return to our seats and to anticipate a few bumps. We don’t feel great about it – it can be a little inconvenient, but experience suggests that rarely is it much to worry about. In some it conjures up a little fear and dread. In a minority, they see their lives flash before them as they envisage impending doom.
And so it is with the election season fast approaching. This week we taxied to the runway and are taking off: Miliband is warming up with his “tax the rich” mantra and Cameron is bashing Europe.
In London, Boris is rushing around seeking concordats designed to win over the masses who resent wealthy buyers snapping up London residential property. Others want to tax them.
The truth is that London has always attracted wealthy buyers from both overseas and the UK. The absurdity of restricting behaviours and looking to clampdown on “dark buildings” is stark as well as shocking. Peers of the Realm, MPs, UK businessmen et al do not stay in London permanently. For centuries, UK wealth has had a London “pad”. This isn’t a “foreign” phenomenon — it is life, albeit in the fast lane.
And where does it all stop?
Should British Land have trawled UK pension funds before partnering Oxford Properties at the Leadenhall Building or Land Securities for Nova before linking with Canada Pension Plan Investment Board? Boris cannot on the one hand describe London as the capital city of the world while looking to prejudice access to all in a free market environment.
From a property perspective, infrastructure investment, tax breaks and planning reform need to sit firmly in central government policy. Inward investment, business growth, manufacturing bases and employment platforms need money and nurturing. The money comes largely and inevitably from overseas equity and global banks. The nurturing must come from politicians setting a confident and solid context for investment.
Instead we are seeing policies driven on the basis of external perceptions and fear. Following strong growth in London, George Osborne heralds the consequent glacial improvement in the UK as a big win. But the recovery is not solid enough to load it up with additional burdens, nor robust enough to turn our backs on inward investment.
There is no argument that suggests anything other than “we are here to help” will garner sufficient confidence to continue to drive economic growth and attract capital to the UK.
I don’t condone rushing straight to Malaysia and doing hundreds of cosy property deals direct with “friends and family”. But however much I don’t condone it, I wouldn’t seek to stop it or change it.
The supposed “hubris” that we see driving real estate pricing in core areas is not blind optimism, it is, largely, investors with lower return criteria seeking a stable market in which to place their capital.
So let’s be clear: we are not out of trouble; we have a dysfunctional trading partner in the European Union; and we have political instability across the globe. Perception is getting ahead of the fundamentals.
The things that set the UK apart, other than its geographical advantage, are a tolerant society, a fair legal system and a benign political climate. Suggesting (or threatening) otherwise is daring foreign investors to go elsewhere — and they will. Curbing free-market behaviours and cutting off the hand that feeds us will not solve our problems.
So let’s land this plane, turn off the seat belt signs and broadcast the familiar message to all: “Welcome to London.”
– Mike Hussey