The Bow Group has published a new report on the UK housing market, proposing radical restrictions on the foreign purchase of UK homes in order to restrain price inflation.
Daniel Valentine, author of the report, says:
- Building more houses, despite being the solution most widely touted, is not the answer to the UK’s housing crisis. In the face of infinite demand from a global elite who see UK housing as an investment market, building more houses will have no downward effect on prices.
- Investment buyers provoke price inflation because they are less price-sensitive, prone to herd behaviour and have considerable buying power. Foreign buyers exacerbate this situation because of their dependence on intermediaries and “experts” who aggressively market UK housing as an investment opportunity.
- London’s emergence as the second-home capital of the world, does not just affect the prices of high-end properties, but pulls up prices throughout the whole market, as buyers at every level are downgraded to the level below. This effect is nothing new in London, which has been a market for second homes for over a century, but the scale of the phenomenon is new, with up to 85% of prime property being sold to foreign buyers
- The building of more houses under conditions of excess demand will have no effect on price. Current house prices are a demand phenomenon. The substantial growth of housing stock since 1998 has failed to check price growth. This fact is used erroneously by the property lobby as an argument for an even greater building programme. A more logical response would be to look elsewhere for the causes of house price inflation.
- Simple defences to protect the housing market exist, and many countries such as Australia, Jersey, Denmark, Singapore, Hong Kong, China and Switzerland already use them.
- Australia has recently introduced controls on the foreign purchase of property and several countries are currently considering controls such as South Africa and Canada.
- The future of UK housing is very grim unless investment money is restricted, because there is an infinite supply of global funds. It is estimated that there are 63 million potential buyers in China alone.
The report proposes a number of policies which would restore sanity to the UK housing market and ensure it remains open to British citizens of moderate means (Each of these proposals is currently in use in at least one territory worldwide).
- Data collection on the nationality of all UK property
- A ban on the foreign purchase of existing homes; only new properties can be purchased by foreigners.
- Prohibit foreigners from selling a property for 5 years after purchase
- Reciprocity principle. Foreign nationals are only allowed to buy in the UK if their home country permits UK citizens to buy property there.
- A restriction of one foreign property per foreign family
- Banning ownership of property by foreign companies
- Prohibition on property purchase by foreigners with criminal records
- Limit the % of homes in any area that can be foreign owned to prevent the development of ghettos (e.g. 20%)
- Limit the % of flats in any block that can be owned by foreigners (e.g. 49%)
- Size limits; foreigners prohibited (or require special permission) to buy properties over a certain size (e.g. 100sqm)
Commenting on the report, Ben Harris- Quinney, Chairman of the Bow Group, said:
“The UK housing crisis is at a point where radical solutions are required to prevent a situation where property ownership in the UK becomes ever more an aspiration of the few, not the many.
Whilst a strong free market foundation is essential, foreign and corporate influence on the UK market has hurt UK citizens, and will continue to do so without intervention.
We believe it is time to put British citizens first again in the UK housing market, and therefore certain restrictions on foreign property purchases should be considered as part of a wider holistic solution to the growing crisis.”