Locked out: Non-residents ‘should face major restrictions on buying British property’
Any non-residents who want to buy property in Britain should be forced to prove they are increasing the stock of housing, according to a radical new proposal.
A new report by think tank Civitas said the measure was necessary to prevent investors pushing the price of property even higher out of reach of ordinary buyers.
"London property is now seen for many in terms of its investment potential, as a safe haven for cash in an unstable global economic climate, rather than something that should be meeting a basic social need for the capital's residents," David Green and Daniel Bentley, co-authors of 'Finding Shelter: overseas investment in the UK housing market', said.
"For too many it is providing financial shelter rather than human shelter."
The proposal comes amid growing concern at the social and economic effect of London property being used as a de-facto reserve currency for the world's rich, who find it a comparatively secure investment option amid a volatile global economic climate.
Some warn that parts of west London are now turning into ghost towns, with new buyers mostly coming from overseas with no plans to ever live in the capital.
Analysts have also warned that London property is frequently being used as a money-laundering mechanism, designed to take criminal money and make it appear legal.
As well as driving up prices, some claim the current set-up encourages investment at the top end of the market, rather than affordable accommodation.
The phenomenon shows no signs of abating, given London's attractive tax regime, transparent legal system and ever-rising prices.
House prices grew by more than eight per cent last year and faster still in London, where prices are now 14% higher than at their pre-recession peak.
The ratio of average prices to average incomes in the UK has increase from 2.3 in 1980 to 4.6 in 2013 – and 6.1 in Greater London.
The introduction of capital gains tax for non-resident owners, announced in the autumn statement last year, is not expected to significantly change the situation.
The Civitas paper demanded that non-residents should only be allowed to buy property if it adds to the number of homes in Britain.
The proposal would see the creation of a 'non-resident housing investment agency' to which non-residents would need to apply for permission to buy.
Permission would only be given if the agency believed a genuine increase in the housing stock would take place, thereby helping to reduce prices in current market conditions.
The requirement could not be applied to EU citizens due to EU law.
Similar schemes are in place in Australia, Switzerland, Denmark and Singapore, where non-resident purchases are tested to make sure they are in the public interest.
"London is one of the most – if not the most – attractive property markets for international investors all over the world. It 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," Green and Bentley wrote.
"It is time for the government to consider what can be done to tackle demand, alongside efforts to boost supply, to ensure that London property is not put forever beyond the reach of its residents by global capital."
Many non-resident purchases do in fact increase the housing stock because developments often only go ahead with off-plan purchases.
