Finding Shelter: Overseas investment in the UK housing market
David G Green & Daniel Bentley, February 2014
Overseas interest in the London property market has grown in recent years. The capital is now one of the most attractive property markets for international investors all over the world.
Foreign buyers are chiefly interested in costly central London properties, on which they spend billions of pounds a year, but the impact ripples out to the suburbs and beyond. The new-build market in central London is dominated by interest from overseas, meaning that even relatively well-paid young people wanting to buy their own home now struggle to do so.
But housing is also at the centre of an affordability crisis in the UK which is having serious consequences for younger people and the less well-off. Average prices have increased out of all proportion to incomes in recent decades and rents have also been forced up, so that many people in London find it necessary to pay half or more of their income in rent. There are significant social consequences arising from this.
This paper considers how overseas interest – which has been largely welcomed by policymakers – has directly and indirectly impacted on the cost of housing in London and the UK, and what might be done to ensure British property prices do not become permanently detached from the means of its residents. David G Green and Daniel Bentley argue that it is time for the the government to consider tackling non-resident demand to ensure that London property is not put forever beyond the reach of ordinary city-dwellers by global capital.
They suggest that overseas investments in the residential property market should be monitored to ensure that all such purchases serve to improve the housing stock rather than increase demand. Britain would not be alone in taking this approach: Australia, Switzerland, Denmark and Singapore all have controls on foreign investment to ensure, essentially, that any non-resident purchases are in the public interest.
In the Media
Stop rich overseas investors from buying up UK homes, report urges The Observer
Think-tank calls for a ban on rich foreigners buying homes in London Daily Mail
Housing bubble forming in London BBC News
It’s the hot money, stupid FT Alphaville
About the Author
David G Green is the Director of Civitas, which he founded in 2000. Prior to that he was at the Institute for Economic Affairs, where he was Director of the Health and Welfare Unit from 1986. His publications include Crime and Civil Society (2005), Individualists Who Cooperate (2009) and Prosperity With Principles (2010).
Daniel Bentley is a former political correspondent for the Press Association and now director of communications at Civitas.Download PDF