UK to monitor overseas property buyers
There is no denying that Britain is in the midst of a housing crisis; and while the government has pledged more affordable housing to assist first-time buyers, foreign investors are being blamed for making it increasingly challenging for young people to get on the property ladder.
The Times investigated further into this matter recently, uncovering that the drop in the pound’s value has led to overseas investors spreading beyond the capital to bulk buy properties in the North, the Midlands and London’s satellite towns.
According to the findings, over 93% of flats in one of Manchester’s largest housing developments have been bought by overseas residents or companies. A mere 17 of the 282 flats were purchased by British residents and just two are currently occupied by UK owners. The remaining flats are being rented out or are not currently occupied.
Daniel Valentine, author of a housing crisis report from think tank The Bow Group, hailed the issue a ‘scandal,’ adding that British residents face a grim future if the government does not take steps to curtail overseas property investment.
“Overseas investors are inflating prices across the entire market, meaning most people on average wages will never be able to buy a home. There is effectively an infinite supply of international money that can pour into the country,” Valentine noted.
The current situation in Manchester is emulating what has been happening in London for some time. Figures from estate agent Knight Frank, cited by The Times, showed that overseas investors bought three-quarters of new builds in central London in 2014.
In a housing development located in London’s Docklands, The Times found that all but 12 of the 56 buyers had Chinese names, while most of the remaining buyers were from the Middle East or Asia.
Government proposes public register
Prompted by The Times’ inquiry, the government has unveiled proposals to bring greater visibility to the market through a public register, which will detail the beneficial owners of property controlled by overseas firms.
If approved, it will be the world’s first public register of overseas firms and other legal entities with UK-owned properties. Though the government has stated that it welcomes legitimate investments, it believes the register will assist in the cracking down of money laundering, affirming the UK’s position as a leader in corporate transparency and anti-corruption.
Since 2004, law enforcement inquiries into corruption on an international scale have uncovered over £180m worth of property in the UK as being alleged proceeds of corruption, with three-quarters of those investigated using foreign firms to hide their legitimate owners. This is an issue that high-level money laundering investigators are encountering on an increasingly regular basis.
Director for Economic Crime and the National Crime Agency David Toon commented: “Criminals and their money launderers will always seek to hide the true ownership of assets, including property, to frustrate investigations and hold onto the profits of their crimes.
“Greater transparency over the true ownership and control of UK property held in the name of overseas companies will make the UK a less attractive place to launder money and will assist investigators [to] track down and recover the proceeds of crime.”
The government called for the opinions of foreign investors, property and transparency experts on how the register should be distributed. At present, owners and controllers of UK firms must be registered with Companies House.
A research initiative – due to launch soon for the Department for Business, Energy and Industrial Strategy – will evaluate the possible effect of the register on inward investment as well as greater corporate transparency.
Business Minister Margot James stressed how the government is dedicated to safeguarding the integrity and reputation of the UK’s property market, commenting: “The extension of transparency requirements […] levels the playing field and means we would know who owns and controls UK property wherever they are from.”
Future housing developments
As a Buy Association article explains, a national research centre – separate from the government – has been launched to offer robust evidence that will inform UK housing policy and practice.
The UK Collaborative Centre for Housing Evidence (CaCHE) is a joint project between 9 universities and 4 non-HEI firms. Working from five hubs across the UK, the centre will bring together a range of stakeholders in a bid to tackle housing issues at local, national, devolved and regional levels.
With the deadline for feedback on the register proposal now passed, the government is likely to publish its outcome in the near future.
In the meantime, if you are a UK property investor, get in touch with Stride today to find out more about our competitive and customised portfolio insurance options.