Property bonanza at expense of taxpayers

Published: 18 February 2010
by RICHARD OSLEY and TOM FOOT

PRIVATE developers are making a killing on council flats auctioned off by the Town Hall. New figures released yesterday (Wednesday) reveal how property traders are collecting fat profits on homes that were originally intended to house council tenants.

Instead of being used to ease the desperate waiting list for housing, hundreds of homes and flats are being sold at a series of auctions to raise funds for the council.

But the latest analysis suggests that buyers who take on the properties are then selling them on for a much higher price – in some cases only a few months later.

A list showing what happened to properties after they were sold by the council show one house in Croftdown Road, Highgate, was snapped up for £1.1million and quickly sold on for £1.9m.

A flat on an estate in Arlington Road was bought for £176,000 and sold for £285,000 – a 49 per cent profit.

And in another case, a flat in Hemstal Road, West Hampstead, was bought from the council last May for £233,000 at auction with the buyer selling it on in December for £345,000.

There is nothing illegal about the practice, known in the industry as “flipping”, and developers are within their rights to buy low, spend a minimum amount of money on refurbishment and then sell high.

Conservative councillor Chris Philp, who is also the parliamentary candidate for Hampstead and Kilburn, exposed the profits being enjoyed by developers after demanding the new information from officers. He said: “A small profit would be acceptable but developers are making around 40 per cent on these properties. That suggests that Camden is not getting the best deal for taxpayers. In some ­cases the reserve price may have been too low or they would have got a better deal if they had gone through an agent and sold it over a few weeks, rather than on the day of an auction. 

The new figures also suggest the homes being sold by the council are not in major disrepair. One developer only needed to spend around £11,000 before selling on a property for a much larger profit. Candy Udwin, of the Defend Council Housing group, said: “Not only is the council selling the homes that people desperately need but they are also selling them at a knock-down price. Not only are these sales morally wrong but also financial madness.”

Lib Dem housing chief Councilor Chris Naylor said Camden had no choice but to sell off homes in order to raise money to pay for refurbishment work to other parts of the council’s ­housing portfolio.

He added: “I wish we didn’t have to sell these homes for three reasons. Firstly, nearly half our homes are still below the government’s minimum standard, far worse than Islington and Brent. Second, this Labour government has withdrawn the £283m they promised for ­Camden’s council homes. 

“Thirdly, the government’s rules state we can only sell to developers, who are of course in business to make a profit and, while we do all we can to push up prices, ultimately if they’re not going to make a profit, they’re not going to buy.”