London Mayor Sadiq Khan has pledged to launch an investigation into foreign ownership of London property, amid worries that it is causing rising house prices and falling home ownership among Londoners.
Sadiq Khan told the Guardian: “It’s clear we need to better understand the different roles that overseas money plays in London’s housing market, the scale of what’s going on, and what action we can take to support development and help Londoners find a home.”
He argued that the increase of foreign buyers was pushing up prices for Londoners, and many of these flats were “buy-to-leave” properties, acting as a safety deposit box.
The origins of buyers of property in London’s West EndUKEuropeUSHong KongSwedenUAEChina
However, Adam Challis, of JLL, has said that 85-90pc of Asian buyers in London plan to rent out their property, and many buy for their children who are attending university in the UK. The number of vacant homes has also declined consistently in the last 11 years, and was 203,596 in 2015, down 36pc since 2004.
Foreign ownership is very difficult to quantify, as many buyers purchase through a company, and also are not obliged to list their nationality. Mr Khan said that this would be the first inquiry to find out the scale of the issue.
Yolande Barnes, director of Savills world research department, estimated that 7pc of property in London is owned by foreign buyers, with more in high-end locations in the centre of the city.
She said: “Foreign buyers are often the focus in discussions about the housing crisis, but really they are only one element in an incredibly complicated picture. Without them investing in properties at the top end, we would not have been able to fund very much social or affordable housing since the financial crash.”
The definition of a foreign buyer is broad, too: it includes residents in Britain who have foreign passports, and 37pc of London residents are foreign-born.
After the vote to leave the European Union, many property experts expected foreign investors to cash in and buy in London, thanks to the low sterling. Juwai.com, an online Chinese property portal, said that buyer inquiries into the UK increased 40pc in the month after the vote for Brexit, fuelled by a new wave of middle-class investors.
Property analysis firm LonRes calculated that prime central London for dollar buyers is at its most affordable since 2012 due to currency fluctuations and price reductions. The average price paid per square foot for dollar buyers has dropped by 29pc to $2,238 since the peak in 2014.
Foreign investment and ownership in northern cities such as Manchester and Liverpool are also increasing, due to HS2 and the idea of the Northern Powerhouse.
Mr Khan said that the inquiry would look into the origins of the money being invested into London property. “We urgently need more transparency around overseas money invested in London property. Londoners need reassuring that dirty money isn’t flooding into our property market, and ministers must now make all property ownership in London transparent so we can see exactly who owns what.”
He added: “We welcome investment from around the world in building new homes, including those for first-time buyers. At the same time, as more and more Londoners struggle to get on the property ladder, there are real concerns about the prospect of a surge in the number of homes being bought by overseas investors.”
Andrew Frost, head of the residential arm at JLL, said: “We are fully supportive of the Mayoral Concordat – New homes for Londoners – signed by the all the major London house builders which ensures an opportunity for London purchasers to buy before, or at least at the same time, as international buyers.
“But Sadiq Khan must be clear that international investment, and therefore off-plan purchasers of London residential property are vital to underpin construction activity, employment and crucially affordable homes. New supply is the only long-term solution to London’s housing crisis and all policy efforts must be towards ensuring Londoners see the homes built that they need.”