Safe havens: overseas housing speculation and opportunity zones

Abstract

Since the 2008 Global Financial Crisis, financialization and housing speculation have expanded in geography, generalized in the political economy, and ingrained into the regulatory system. This article adds to the growing understanding of global capital flows and transnational housing investment. The main contribution of this paper is an articulation of ‘safe havens’ — districts designed as a harbor for global capital; a place of refuge during market uncertainty; and a place offering favorable conditions for capital growth. In New York, London, and Melbourne, luxury districts functioned primarily as investment vehicles to facilitate the circulation and expansion of capital after the financial crisis. Case studies draw upon census data, non-governmental and industry reports, academic studies, and local news sources and find that (1) capital funnelled into local housing through government incentivization; (2) vacancy increased in areas with rapid price rises; and (3) new investment zones were constructed to accommodate overflows of safe-haven demand and fuel recovery from the financial crisis.

Keywords:

• Safe haven
• opportunity zone
• housing speculation
• transnational property investment
• multiple property ownership
• globalization
• financialization

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 This definition contextualizes Webster’s dictionary definition of a ‘haven’ as (1) a harbor or port (2) a place of safety or refuge (3) a place offering favorable opportunities or conditions (Merriam-Webster, no date). In financial literature, a ‘safe haven’ is “a place of safety that offers investors shelter (i.e., nonnegative returns) in extreme market conditions” which may be gold, cash, real estate, etc. (Baur & Lucey, 2010, p. 220).

2 Rogers & Koh (2017) cite "an ‘absolute bare minimum’ of US$50 million in disposable assets" (p. 3), but wealth management and academic reports are more likely to define the next significant cohort as 'billionaires'.

3 Prime International Residential Index (PIRI), from Knight Frank’s annual ‘The Wealth Report’, measures sales prices in the most expensive 5% of select global city markets as a percent change from the previous year. Melbourne first appears in the 2014 report.

4 ‘Rent’ for New York follows Manhattan private rent per-square-foot (Elliman, 2018); London follows inner-London average private rentals (VOA, 2018); Melbourne follows inner-Melbourne median rents (Victoria State Government, HHS, 2018).

5 ‘Currency Exchange Rate’ follows the World Bank’s Real Effective Exchange Rate Index (World Bank, 2018b).

6 ‘Income’ for New York follows ‘median household incomes’(U.S. Census Bureau, 2019a); London follows ‘median gross annual earnings’ (ONS, 2019); Melbourne follows ‘mean gross household income’ for Victoria, an approximation for Melbourne, where 75% of Victoria’s population lives (ABS, 2018). Data for ‘Rent’ covers only central areas while ‘Income’ covers the larger city. Income is meant to convey the economic outlook of the average city resident and city-wide data does not merely reflect a demographic reshuffling in the central city.

7 Of 28,554 overseas purchases, 3,806 were listed without postcode locations and not included in the data.

8 Since receiving scrutiny in 2017, the Shard’s owners have not responded to reporter inquiries. No sales were recorded in Land Registry data in 2018/19, but the current status of the penthouse apartments remains obscured.

9 In 2016-17, the Community Infrastructure Levy and Section 106 developer contributions promised £2.3 billion in London including £1.2 billion for affordable housing (Lord et al., 2019).

10 An argument could be made that Fishermans Bend fits this description, but development is currently in early stages.

Additional information

Notes on contributors

Jae-Yong Chung

Jae-Yong Chung is Professor of Architecture and Urban Design at Hongik University, Seoul and director of the Ecotopia research lab. His research focuses on urban planning, policy and architecture with a focus on balanced and sustainable development at an urban and regional level.

Kevin Carpenter

Kevin Carpenter is a graduate student in the School of Architecture at Hongik University, Seoul. He is participating in Hongik University's Global Joint-Research Program where his research is centered on the intersection of urban geography, globalization, policy and design