Over the past 15 years UK housing prices have increased by 20% with foreign investors contributing to the increase in values. It is not just in London and the Southeast which have been the most popular locations, but other cities including Leeds, Liverpool and Manchester have also been affected according to the latest research by School of Management and Business at King’s College London.
The report examined an analysis by Land Registry that shows the average price for a home in Britain is nearly £215,000 but would actually only be about £174,000 without foreign buyers. It is suggested that while most of the homes that are purchased are at the higher price levels they do eventually cause less expensive homes to become overpriced to potential buyers.
Professor Filipa Sá commented; ‘One of the factors behind house price growth in countries such as the UK, Australia and Canada is demand from foreign investors. This study looks at data for the UK and argues that foreign investment had a significant and positive effect on house price growth in the last 15 years.’
The study explains that since 1999 average house prices in England and Wales have almost tripled from just over £70,000 to about £215,000 in 2014. Prices vary by region with the prime property locations of Kensington and Chelsea at £1.3 million in 2014. Apart from a reduction at the height of the global financial crisis in 2009, house prices increased every year during this period.
‘Buyers from overseas don’t just have an effect on the upper end of the housing market where they tend to buy properties as there is a ‘trickle down’ effect to less expensive properties, the research also shows.’
‘It also suggests that it reduces home ownership rates, suggesting some ordinary buyers in Britain may be priced out of the market in areas where foreign investors are more active and have to rent rather than own their homes.’
Analysis of property transactions in Britain and Wales by overseas firms allowed researchers to calculate the value, volume and effects on house prices.
Professor Sá found that ‘…an increase of one percentage point in the volume share of residential transactions registered to overseas companies leads to an increase of about 2.1% in house prices.’
Sá concluded that foreign buyers purchase properties purely for capital appreciation and do not occupy them or rent them out.’
London Mayor, Sadiq Khan recently announced a proposal that would make sales of London property available to local or British buyers first before foreign nationals could make an offer.
By Kevin Murphy: www.kevinmurphy.london