Brexit Housing Problems
Foreign investors could face tougher restrictions buying UK homes in a bid to help more Britons get on to the property ladder.
The Treasury is reported to be planning the move as part of a drive to help more young people buy their own home.
It is not known what form the restrictions would take, but it has been suggested they could include punitive taxes.
The Government is understood to be discussing the issue this week, ahead of the Conservative Party Conference, with a policy announcement expected in the next few weeks.
Why is this happening?
First-time buyers in the UK are facing increasing competition from foreigners purchasing UK property as an investment.
A study carried out for the Mayor of London, Sadiq Khan found that overseas buy-to-let investors bought 3,600 new build homes in the capital between 2014 and 2016, half of which were aimed at first-time buyers.
The problem is not isolated to London, with reports of foreign buyers also snapping up new build apartments off-plan in other cities.
UK property is particularly popular with investors from Asia.
Six out of 10 overseas buyers identified in the Mayor’s research came from Asian countries, with Hong Kong accounting for the highest proportion, followed by Singapore, Malaysia and China.
Who does it affect?
A move to restrict foreign investors from buying new build properties would be good news for first-time buyers, as it would reduce the competition they face.
The UK is already failing to build enough homes to keep pace with domestic demand and the problem is being exacerbated by foreign buyers.
But developers have previously warned that international buyers provide an important source of funding for new build schemes.
Restricting buyers from overseas could also have a significant impact on the property market in central London, where the Mayor of London’s research found that a third of new homes in Westminster, Kensington and Chelsea and the City of London are owned by overseas investors.
Sounds interesting. What’s the background?
If the restrictions do come into force, they will be the latest in a series of measures to help first-time buyers.
On the one hand, the Government has tried to make property more affordable, such as through the Help to Buy scheme, under which people can purchase a property with just a 5% deposit, and the Starter Home Initiative, under which first-time buyers can buy a home at a discount to the market rate.
It is also helping people to save towards a housing deposit through the Help to Buy ISA, under which it will boost the savings of people buying their first home by 25% up to a maximum of £3,000.
In addition, the Government pledged to increase the supply of property in its Housing White Paper by speeding up the house building process and creating high density developments in towns and cities.
Did you know?
- There are no restrictions on foreign ownership of residential property in this country, but there are rules in place to ensure tax is paid to the UK Government when purchasing a home, and in relation to any rental income received
- In July this year, a House of Commons briefing paper on foreign investment in UK residential property concluded there were no official statistics on the sale of residential property to overseas buyers
- However, it revealed increased interest from international buyers to purchase property in centres outside of London, including Manchester, Liverpool and Birmingham and Slough
Top 3 takeaways
- Foreign buyers could face tougher restrictions in a bid to help more Britons get on to the property ladder
- The Treasury is reported to be planning to introduce the restrictions as part of a drive to help more young people buy a home
- A policy announcement is expected in the next few weeks