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Comment by NotableAlamode | Hacker News Reader

Use diminishes value, but this is nicely compensated for by rent, and more than compensated by London rental levels. Leaving a property empty is also not without problems (think heating, burglary, squatting, taxes). The number of people rich enough to buy pied-a-terres in (one of) the world's most expensive real estate markets is too small to justify the 40% figure (or anything like it).

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These buy-to-leave flats are generally newly built (and were bought off plan), in high rise buildings with concierge / security, so there are no worries about heating, burglary or squatting...

I'd guess the price of these is around £350k - £1.5m (for a reasonable 1 - 3 bed flat in a new build), which is well within the reach of well off foreign middle class investors.

It is within reach, but it would be financially wildly imprudent to forgo the £1000 - £3000 monthly rental income that such properties would fetch. Bear in mind that you will have to pay council tax and other fixed costs anyway. It would be a desperately terrible investment, much worse than other, more liquid assets. The global middle class cannot afford such investments. Maybe members of the Saudi royal family, but they won't be that interested in 1 bedrooms in Islington.

It's interesting that I'm being downvoted for the message above. What's wrong with it?

Incidentally, I just had lunch with an architect and a guy who runs a building company, both London-based. I asked them about this. They both agreed that no sane investor would leave flats bought as investments empty. Investment means basically having tenants. The agreed that there is a media-driven moral panic about this. The architect said he had one client who had a 12 bed-room house in central London that was empty for most of the year ... that customer was a member of Kuwait royal family.

There is not much of a rental market for these £1m flats which to cover costs would have to rent at £40-50k a year. The number of people who can afford this us minute.

True, but rent and property value are strongly positively correlated, so there would also not be a very liquid market for buying and selling such flats. That would make it even worse as a speculative investment. `

I'm not saying such speculative investment doesn't exist, I just doubt it is as ubiquitous a phenomenon as claimed.

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