Overseas buy-to-let investors bought 3,600 new build homes in the capital between 2014-16, according to research for Mayor of London Sadiq Khan.
What’s the latest?
Thousands of homes in London that are suitable for first-time buyers are being snapped up by foreign investors who then rent them out.
Overseas buy-to-let investors bought 3,600 new build homes in the capital between 2014 and 2016, according to research carried out for the Mayor of London Sadiq Khan.
Around half of the properties they purchased were aimed at first-time buyers, with prices of between £200,000 and £500,000.
A third of new homes in the prime central areas of Westminster, Kensington and Chelsea and the City of London were also sold to overseas buyers.First-time buyers searching for a home in London might consider this two-bedroom apartment, being sold for £395,000 in East Finchley
Why is this happening?
UK property has long been viewed as an attractive investment by overseas buyers, and the recent strong house price gains in London have increased its appeal.
Housing in the capital is also often viewed as a safe haven for cash, particularly among investors from countries that are politically unstable or those with volatile currencies.
Six out of 10 overseas buyers in the Mayor’s research came from Asian countries, with Hong Kong having the highest proportion, followed by Singapore, Malaysia and China.
More than 70% of the properties were bought as buy-to-let investments, while 15% were purchased by companies, some of which were based in tax havens, such as the Cayman Islands, Channel Islands and British Virgin Islands.
Who does it affect?
The growing trend for overseas investors to snap up London properties presents yet another hurdle for potential first-time buyers.
The UK is already failing to build enough homes each year to keep pace with its rising population, and this mismatch between supply and demand is one of the key factors driving house prices higher.
The additional demand from overseas investors will only make the problem worse.
At the same time, those trying to get on to the property ladder will face more competition for the homes they want to buy.
Sounds interesting. What’s the background?
The practice of allowing foreign investors to buy property in the UK has long been contentious.
Earlier this year there were reports that all of the units of one new apartment complex in Southwark were bought by overseas investors and 87% of another one in the Isle of Dogs were sold to foreign buyers.
The trend has led to MPs calling for a law to be introduced under which property developments must be marketed in the UK before they can be advertised overseas.
Others have gone further and said foreign buyers should be blocked from purchasing new build homes until local people have had a chance to buy them.
But developers argue that foreign buyers provide an important source of funding for new build schemes.
Top 3 takeaways
- Overseas buy-to-let investors purchased 3,600 new build homes in the capital between 2014 and 2016
- Around half of the properties they bought were aimed at first-time buyers, with prices of between £200,000 and £500,000
- A third of new homes in the prime central areas of Westminster, Kensington and Chelsea and the City of London were also sold to overseas buyers
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