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London mayor launches unprecedented inquiry into foreign property ownership www.theguardian.com

London mayor Sadiq Khan is to launch the UK’s most comprehensive inquiry into the impact of foreign investment flooding London’s housing market, amid growing fears about the scale of gentrification and rising housing costs in the capital.

Khan said there are “real concerns” about the surge in the number of homes being bought by overseas investors, adding that the inquiry would map the scale of the problem for the first time.

“It’s clear we need to better understand the different roles that overseas money plays in London’s housing market, the scale of what’s going on, and what action we can take to support development and help Londoners find a home,” Khan told the Guardian.

“That’s why we are commissioning the most thorough research on this matter ever undertaken in Britain – the biggest look of its kind at this issue – so we can figure out exactly what can be done.”

Earlier this year, the Guardian revealed how a 50-storey block of 214 luxury apartments by the river Thames in Vauxhall was more than 60% owned by foreign buyers. In one of the starkest examples of the impact of foreign investment, it found that a quarter of the flats were held by companies in secretive offshore tax havens, and many were unoccupied.

In China, experts predict the current scale of global investment in UK property could rise significantly over the next decade, with a “new wave” of middle-class investors from mainland China quadrupling the amount of money flowing annually into foreign real estate – including the UK – to $200bn (£150bn) in the next 10 years.

Charles Pittar, chief executive of Juwai.com, a website that aims to pair Chinese investors with property developers overseas, said he expected a major jump in investors looking for a return in Britain, adding: “The UK market, particularly post-Brexit, is really picking up.

“Our thesis – and this is supported by quite a lot of evidence – is that in many ways the international Chinese investment journey is probably just starting … The exciting thing about China is that there are 168 cities with more than a million people. So this is just such a huge market.”

That view is supported by Victor Li, a director of international project marketing for the US real estate giant CBRE, who also predicts a spike in investment in British homes over the next decade.

“I think it is just beginning,” said Li, predicting that only 3% of the potential investors in overseas property had so far been located across mainland China: “It is a big market, and they are getting wealthier and wealthier.”

Critics say the influx of foreign investors is contributing to a spiralling housing crisis in the capital. Earlier this week, it emerged that the number of thirtysomethings leaving London has leapt in recent years, as high housing costs have forced people to move out.

Overseas buyers are also increasingly focusing on towns and cities outside the UK capital – with Manchester, Liverpool and Birmingham all identified as “hotspots” as buyers try to get more for their money while avoiding new stamp duty rules. Property in London’s outer suburbs and even satellite towns such as Slough is being marketed in Hong Kong to potential Chinese buyers.

Foreign investment has helped drive a fresh property building boom around the UK. Liverpool has received millions of pounds of overseas investment in housing and property in the past five years, including a £200m New Chinatown development that is under construction and is being heavily marketed in China. Earlier this year, Sheffield announced a multibillion pound deal with a Chinese construction firm that would generate four or five city-centre projects over the next three years and create “hundreds if not thousands” of jobs in south Yorkshire.

The Chinese are the biggest buyers of new-build residential accommodation globally, with the Singaporeans second and the British fourth, according to international property agents Knight Frank.

Khan’s inquiry will focus on the scale and impact of different types of overseas investment in London. It will examine how foreign cash has changed the housing market – from exclusive high-cost accommodation to middle- and low-cost homes – in different parts of London, and explore how other international cities are tackling the problem.

Khan said: “We welcome investment from around the world in building new homes, including those for first-time buyers. At the same time, as more and more Londoners struggle to get on the property ladder, there are real concerns about the prospect of a surge in the number of homes being bought by overseas investors.”

One key aim of the research will be shining a light on who is investing and where the money originates from.

Khan said: “We urgently need more transparency around overseas money invested in London property. Londoners need reassuring that dirty money isn’t flooding into our property market, and ministers must now make all property ownership in London transparent so we can see exactly who owns what.”

But some housing market commentators warn it would be a mistake to focus only on foreign investment when tackling London’s housing crisis. Yolande Barnes, director of Savills’ world research department, said foreign buyers accounted for only 7% of property purchased across Greater London, although that figure is likely to be higher in inner-London hotspots. And she said that investment had helped bring forward nearly all the “affordable homes” built in London since the 2008 financial downturn.

“Foreign buyers are often the focus in discussions about the housing crisis, but really they are only one element in an incredibly complicated picture. Without them investing in properties at the top end, we would not have been able to fund very much social or affordable housing since the financial crash.”

Barnes said the real issue was the price and scarcity of land available for development in the capital.

“Like any major world city, the issue in London centres around the fact that there is not enough of the most popular bits of the city to go around. Inner London land rarely comes on to the market, and it only makes sense for people to release land and turn it into residential units if they are going to get a suitable return – which normally means high-end luxury developments.”

However, a recent study by academics at London’s Goldsmiths University found that the influx of cash into the capital’s luxury housing market from the global super-rich was having a wider impact on gentrification across the city.

It discovered that foreign investment at the top end had pushed London’s “traditional elite” residents from their wealthy enclaves in places such as Mayfair, Chelsea and Hampstead, and created a “trickle down” effect – raising prices beyond the reach of most people in previously cheaper London neighbourhoods.

Deutsche Bank: From bombs and bravado to risks of a bailout www.bbc.com

Deutsche Bank is under the most pressure a major lender has faced since the financial crisis, but many trace its woes back beyond the banking crash.

On a cold November morning in 1989, Alfred Herrhausen left his house in the Hessian town of Bad Homburg, climbed into his chauffeur-driven Mercedes-Benz, and settled in for the routine journey to his Frankfurt office.
A few minutes later, he was dead.
As the head of West Germany's largest lender, Deutsche Bank, Mr Herrhausen had been a target of the anti-capitalist, radical-left Red Army Faction.
The group opposed the 59-year-old banker's "imperial" ambitions: his advocacy of closer European integration, his counsel of then-Chancellor Helmut Kohl, and his championing of economic internationalism.
But although the attackers succeeded in taking Mr Herrhausen's life, they could not extinguish his unique vision, one that paved the way for Deutsche Bank's soaring success in the Nineties and through the new millennium, and one that may have sown the seeds of its recent decline.
'Imperial ambitions'
Just three weeks before the attack, Deutsche, which for decades focused on servicing Germany's home-grown industrial heavyweights, had made its first foray into the heady world of investment banking, by buying the British merchant bank Morgan Grenfell.
The acquisition, masterminded by Mr Herrhausen, was designed to catapult Deutsche to the top of the global banking ladder, and to broaden the institution's reach beyond Germany's - and indeed Europe's - borders.
Alfred Herrhausen was the mastermind behind Deutsche's expansion
What Mr Herrhausen had realised was that the German market, "dominated by savings and co-operative banks, and not-for-profit institutions, was no place for a private bank to grow," explains Deutsche Bank's former chief economist, Prof Thomas Mayer.
Whatsmore, as the West German economy boomed in the lead-up to reunification, the likes of Siemens, Daimler and Volkswagen, some of Deutsche's biggest clients, were looking for access to capital markets on which to issue corporate bonds, rather than relying on more traditional banking services.
In the following years, in an attempt to beef-up its international offering, Deutsche spent billions of dollars on poaching the best talent from American titans such as Merrill Lynch - including Anshu Jain, who went on to spearhead the bank's global expansion until his resignation last year amid serious accusations of wrongdoing in the lender's investment unit.
Such was the culture change, that, as legend has it, Deutsche's name had to be spelt out phonetically on the signs in its London offices, as some of the foreign employees charged with diversifying the bank's operations had trouble with German pronunciation.
The new recruits were, by design, cut from a different cloth than Deutsche's German employees. Mr Herrhausen had talked of bringing an "Anglo-Saxon" financial culture to the bank, with the hope that they would inject some Wall Street bravado to the rather conservative, staid organisation.
'Cut corners'
For at least a decade, the plan worked. Deutsche's profits soared, and its share-price rocketed. At one point, it was the sixth biggest bank in the world, as respected in Manhattan as it was in Munich.
Even in 2008, when the financial crisis led European stalwarts such as UBS and Credit Suisse to seek bailouts, Deutsche weathered the storm on its own.
But unlike those banks, who downsized in the wake of the global crash, Deutsche "missed the point where they needed to rebalance their business model," according to one financial journalist who has been scrutinising the company for years.
Deutsche has been accused of becoming more arrogant after surviving the downturn.
Predictably, the London and New York based financiers who transformed Deutsche into a global player were less risk-averse than their Frankfurt colleagues, and, as Prof Mayer alleges, they cut corners.
"You can attribute many of Deutsche's current problems to the army of investment bankers who joined in the 90s," he says. "They were given a mandate to push the bank into the investment banking league tables, and they took reputational risks.
"They were in the business of making money, and they did not proceed cautiously."
Deutsche Bank clockImage copyrightREUTERS
Deutsche, which now employs roughly 100,000 people across more than 70 countries, is paying a heavy price for those risks - in fact the second biggest since the financial crisis.
A whopping $14bn fine from the US Department of Justice for mis-selling mortgage backed securities, which isn't much less than the size of Deutsche's current market capitalisation, is just the latest penalty for a litany of misdeeds, including manipulating Libor rates and fixing gold prices.
Despite a famously impressive art collection, the bank has precious few assets left to help British chief executive John Cryan raise much needed capital.
Ironically, Deutsche, which paid billions of euros in bonuses to its star bankers even after suspending its dividend payments to shareholders, is struggling to keep key staff.
'World's most dangerous'
It is not just Deutsche's investors who are concerned. After more than 25 years of vigorous diversification, including a string of small acquisitions across the world, the bank's tentacles reach many parts of the global economy.
The IMF has called Deutsche the world's most dangerous bank, and as one insider explains "if Deutsche Bank goes down, everyone else has a problem too".
But although the German giant is in dire straits, its demise is anything but inevitable.
For one, there are now regulatory regimes in place, which mean that various bondholders and large depositors would suffer a haircut to help shore up the bank's balance sheets.
Additionally, the long shadow cast by the collapse of Lehman Brothers has left world leaders with little appetite for allowing another large lender to hit the buffers.
Nonetheless, a government bailout seems unlikely, at least in the very near future.
EU legislation makes it difficult for countries to inject cash into a failing financial institution without making sure investors take a hit first - a point Angela Merkel has been keen to make to the her Italian counterpart, Matteo Renzi, who was prevented from using Roman money to prop up the failing Monte De Paschi bank.
Plus, as Prof Mayer explains, there is hardly any love left for the once-iconic bank among ordinary Germans, who tend to see the beleaguered lender as more of a national embarrassment.
Whatever Deutsche's fate, the almost 150-year old bank's rise and fall has served, as Prof Mayer puts it, to "refocus people's attention" on the problem that faced Alfred Herrhausen three decades ago - expansion inevitably comes with exposure.
"It was the right decision to go into investment business," the Deutsche veteran, who left the bank in 2012, insists.
"But there were difficulties in execution".
It is hard to know what Alfred Herrhausen would make of the mistakes made in pursuit of the mission he helped set in motion, and of Deutsche's prolonged failure to face up to its frailties.
But a clue to how he would handle the current crisis may lie in the inscription on the two memorial pillars erected on the site of the pioneering chief executive's murder.
A quote by Austrian poet Ingeborg Bachmann, it reads: "Die Wahrheit ist dem Menschen zumutbar".
"People," it translates, "can handle the truth".

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