The Bow Group’s case is that foreign buyers are distorting the market while failing to provide properties that do anything to meet the housing needs of middle-income British workers
Last week, Conservative think tank the Bow Group published a well-argued paper which makes the case for restricting overseas-based investors from buying property in the UK, primarily London. This is not a new idea – but it’s new from the Conservatives themselves, so worthy of closer inspection.
The Bow Group’s case is that foreign buyers are distorting the market while failing to provide properties that do anything to meet the housing needs of middle-income British workers. The data does back this up. In 2013, estate agent Knight Frank found that 70% new-build property in the capital went to overseas buyers as well as 50% of all properties worth £1m-plus.
The paper goes on to make the point that while we do not restrict overseas buyers purchasing here, countries such as Singapore bar Britons from buying property while others such as Denmark and Australia place tight restrictions on overseas buyers.
One obvious riposte to the Bow Group’s paper is that this is primarily a London issue. Magnates from Asia and Russia are not exactly making a beeline for the Midlands or South Wales to gobble up homes. But this is where the ripple effect comes in. If we accept that London is the price pinnacle of the UK housing market, then increases there ripple outwards throughout the South East. I wrote recently about the growth of the so-called million-pound towns in the Surrey commuter belt where the average house price has topped £1m. If one accepts the validity of the ripple effect, then the Bow Group’s argument has merit.
One must also decide on one’s view of government intervention in the mortgage market. While some may cry for politicians to leave the market alone, such intervention is fairly commonplace in the UK. The government’s regulation of the sector combined with stamp duty freezes and Help to Buy schemes are all ways in which the state already prods and nudges the mortgage market into the shape most palatable to politicians and voters. Placing restrictions on foreign buyers would be just another such initiative.
This is not a new debate – the case for restrictions has been made before. Estate agents have certainly kicked against the idea, but the prospect of London-based estate agents wanting to shut their doors to foreign buyers with deep pockets is unlikely. No, what is interesting is that this new paper comes from a Conservative organisation which states: “This report argues that it is time for the British government to help British people and reverse the trend for London homes being turned into safety deposit boxes and trophy assets for the super-rich of Asia and the Middle East.”
Could we be seeing the Government testing the water on this issue? Time will tell. But faced with an election, it seems to be a policy that would prove attractive to many British voters.
Tony Ward is chief executive of Clayton Euro Risk
