The number of homes in England and Wales owned by foreign buyers has almost tripled since 2010, with close to 250,000 residential properties being registered to individuals based overseas - amounting to 1% of all registered titles.
According to the Centre for Public Data (CFPD), which collated analysis using freedom of information requests to HM Land Registry, less than 88,000 homes were owned by foreign investors in 2010.
The issue of overseas ownership of property in the UK is a contentious one, with this latest reveal doing little to ease concerns that foreign ownership plays a significant role in pushing up the prices of UK properties.
Why is foreign ownership of UK properties on the rise?
There are several potential explanations for the rise in foreign ownership of UK properties.
In many ways, the increase in the number of overseas buyers simply reflects significant levels of growth in global wealth. Locations such as Hong Kong, Singapore and Malaysia, which are all experiencing continued economic growth, are all major sources of foreign property investments in the UK.
For example, Hong Kong is the single largest source of overseas buyers, with around 23,500 homes in England and Wales being owned by residents of the city. This is a dramatic increase from 2,170 homes being owned by Hong Kong residents in 2010.
On the whole, the UK housing market also presents a safe bet for overseas investors. The solidity of the legal system, combined with the relative stability of the housing market compared to other countries, means that investors are increasingly confident they will be able to make a solid return on their initial investment.
It has also been found that overseas ownership has recently soared in cities such as Liverpool and Manchester. Both cities have experienced rapid rates of development over the past ten years, which may factor into the high levels of demand from foreign inventors. Typically, overseas buyers tend to favour new-build properties.
As may be expected, Brexit also may have had a part to play in the rise of foreign ownership. Since the EU referendum in 2016, the depreciation of sterling has led to favourable exchange rates for many foreign investors, opening up a wider section of the property market.
What does the increase in foreign ownership mean for the UK property market?
As we’ve already touched on, there are understandable concerns that the increase in foreign investment is directly contributing to the rise of average property prices in the UK.
It’s a fact that house prices have risen from an average of £167,500 at the start of 2010 to £264,000 in August 2021. It shouldn’t come as much of a surprise to learn that an increase in the demand for homes can quickly lead to a sharp rise in the average cost of a property. As interest from overseas continues to grow, this is only likely to drive average prices up even further – though there isn’t enough to say whether this is definitively a causal relationship.
With house prices at a record high, the UK housing market is could very well be teetering on the edge of an inevitable collapse, something the rise in foreign investment may have contributed to.
On the other hand, inflated house prices may simply become the new normal, meaning UK house buyers will continue to face stiff opposition from overseas investors, who may be in a stronger position to pay over the odds for certain properties.
Will any action be taken to address the rise in foreign ownership in the UK?
There have been plenty of calls for the government to act in response to the rapid rise of overseas investors, especially as there are no immediate signs that the rise of average house prices will be slowing down.
In April 2021, the government introduced a new Stamp Duty Land Tax surcharge for overseas buyers of residential property. This added an extra 2% on to the tax payable for purchases. It was suggested at the time that the funds raised from this additional tax would be used to help alleviate homelessness while also directly contributing to UK residents getting on the property ladder.
The founder of the CFPD, Anna Powell-Smith, has suggested that the government should go one step further. The group has recommended that the government should introduce a register of the beneficial owners of property registered via overseas companies.
Government ministers had previously committed to do this in 2018 to ‘bring new levels of transparency to overseas ownership of UK property’ but are yet to implement it.
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