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By Tom Bill and Max De Haldevang
LONDON, Aug 15 (Reuters) - Custom at David Zambra's upmarketcentral London shop, once a supplier of stationery to QueenVictoria's family, has fallen 10 percent each year since 2009.
The British economy is weak and internet shopping on therise but he blames super-rich foreign buyers who have snapped uphomes in his Belgravia neighbourhood, one of the world's mostaffluent, leaving them empty for much of the year.
The wealthy including from the Middle East and EasternEurope have poured money into luxury properties in places suchas Mayfair and Knightsbridge, seen as safe investments duringthe financial crisis and footholds in a dynamic city.
Many are rarely visited by their owners, leaving parts ofimportant economic areas deserted, squeezing local businessesalready suffering in tough trading conditions.
The investment has helped estate agents, house sellers andthose providing services to the owners when they are in town.
But others complain it has pushed up prices, making itharder for locals buy homes, widening the gap between therichest and poorest in London and damaging the fabric of localcommunities.
Several politicians say they are worried about the trend andare looking into the economic fallout.
"It (the local area) is in danger of becoming a ghost citybecause there aren't enough people here all the time," saidZambra, who bought the H.R. Stokes shop in 1989.
Overseas buyers of high-end London homes accounted for 38percent of deals last year compared with 23 percent in 2005,data from property consultant Savills shows. Just overhalf were for use as a main home.
The figure for non-British buyers rises to 65 percent forhomes worth more than five million pounds ($7.7 million) and 85percent for new-build properties in the same price bracket.
Exacerbating the problem for retailers is a surge in thenumber of conversions of offices into more lucrative residentialuse, which further cuts passing custom. Figures from propertyconsultant H2SO show a 168 percent rise in the amount of officefloor space lost to residential last year versus 2011.
It has not dented steadily rising sales and footfall in topareas like Oxford Street or Regent Street, which ensures overallvacancy rates in London's wealthiest postcodes are below thewider averages for the city and rest of the country.
But not far from the bright lights and tourists of theseworld-famous shopping strips, the outlook is gloomier.
Reuters spoke to more than a dozen retailers in such areasacross Mayfair, Knightsbridge, Belgravia, Earl's Court andKensington and Chelsea who said custom was falling and mostexpressed concern about the effects of empty homes.
Nainesh Shah, who has worked in Knightsbridge and Belgraviafor 32 years began to feel the impact in 2010, when footfall athis newsagent fell by a quarter and sales by over a fifth.
"They're (overseas homeowners) not here with the interest ofstaying and building a relationship," he said.
BUY-TO-LEAVE
Such comments tally with views expressed to the localgovernment in Westminster, an area that includes many ofLondon's wealthiest streets and accounts for about 3 percent ofnational gross domestic product.
"Never mind about buy-to-let property, we are concernedabout buy-to-leave," said Rosemarie MacQueen, an official atWestminster City Council, which commissioned a study to bereleased later this year examining the impact of a rising numberof homes compared with offices and shops.
"Given the contribution we (Westminster) make to thecountry's GDP we have to be sure about every change of use toresidential."
Others spoken to by Reuters included the manager of abakery, who declined to be named but said sales had slumped by afifth at his Belgravia site, contrasting with the fortunes of asister site on the main King's Road shopping strip in Chelsea.
"The area is dying somehow. We get quite a lot of Russianscoming in but they come just once and never come back."
"They (small businesses) see a rich and affluentneighbourhood and think the success will rub off but that'ssimply not the case," said Jane Morris, managing director ofinterior design shop Percy Bass in Knightsbridge, less than halfa mile from the Harrods department store.
Politicians are taking note of the retailers' distress,including Simon Hughes, the deputy leader of the LiberalDemocrats, the junior party in Britain's coalition government.
Hughes is lobbying for additional taxes for overseashomebuyers because of the capital's housing shortage and saidlocal businesses were also under threat.
"London is a series of villages and villages to survive needenough customers who go to the village pub, the village shop andthe village bakery," said Hughes, who is also a member ofparliament for an area of central London.
Developers say politicians are just trying to win voteswhile ignoring the wider economic benefits of overseas moneycoming into London.
"These politicians have zero understanding of the Londonproperty market and make comments that are damaging andself-serving," said Alex Michelin, co-founder of high-endresidential developer Finchatton, which sells homes worthbetween 5 and 70 million pounds.
"These guys spend more than the average person spends in ayear when they are here, all without using public services. Mostworld cities would give their left arm to have what London has."
DISPARITIES
With the flow of overseas money showing no signs of slowing,there are risks to central London becoming a playground for theworld's rich while nearby areas such as Southwark, Lambeth andTower Hamlets are home to some of Britain's poorest parts.
Britain is second behind the United States among G20countries for economic inequality and the disparity in centralLondon is already more extreme than elsewhere in the country,said Stewart Lansley, an economist and author of a book onincome equality.
A wide gap between rich and poor can stifle aspiration andfuel resentment as domestic buyers are pushed further afield andprices rise all the way down to the cheapest houses, making itharder for those with lower incomes to buy a home.
Lansley said economic instability also rises due to "growinglevels of debt at the bottom" and a "speculative ball of moneytravelling the world" at the top.
"I don't think the levels of inequality you see in centralLondon are sustainable," he said. "A whole army of cleaners andfast-food sellers on which the city depends are being forcedout. Sooner or later something will have to give."
Westminster Council shares these concerns and couldintroduce curbs on the residential sector, said MacQueen.
"This isn't about a lack of money," she said. "When you'vegot five residences, it becomes a problem of too much money."
