It has been known for a long time that offshore ownership of property in the UK hugely distorts the London property market, in particular. There is one report on this issue in the Observer this morning. It is also widely recognised that many developers now construct buildings that are designed to meet the offshore property market and not local people. The issue has become increasingly controversial as young Londoners struggle to buy a home, priced out of their city by mysterious offshore cash.
Last week, Transparency International has released a report that sought to provide some hard data on this issue. The report, called Faulty Towers looks at how much money from offshore has flowed into high value property development in London. Amongst other things it finds that areas with high levels of offshore ownership have lower electricity consumption, which suggests homes being kept empty. The report also identifies £4.2bn in property bought with suspicious wealth.
There is still a need for more action on this issue. Chancellor Philip Hammond shoukd take note.
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So, just as Government(s) in the past stood idly by whilst we let international asset strippers lay waste to our industry from the 1970’s (and leaving the cost of that at the table of the Government and tax payers), we now let international money interfere with the nation’s capacity to house its people and use its land?
All in the name of ‘inward investment’?
In another age, the politician who behave so traitorously would have been executed and had their heads impaled on a pike.
But now the new monarch is mobile and transnational – it’s called MONEY.
Hammond in my view will not blink and eyelid about this – ‘inward investment’ is welcome especially when you obdurately do not want to spend any Government money and you can dress it up to make the UK economy seem buoyant.
He may change his mind if those being harmed see the epiphany and realise that it is his Government who are essentially causing this but will the Tories be rumbled?
I wouldn’t bank on it but you never know.
AS you have said (and has been written elsewhere) tax havens are places that function for the rich only and the ‘locals’ are just an irritation whose needs can be ignored.
Foreigners buying UK property is part of what helps the UK to run a trade deficit. If we are to continue enjoying the benefits of this trade deficit, then we should build even more properties desirable to foreign buyers.
Meanwhile London has a green belt that is twice the size of the metropolitan area, has height restrictions on building in the suburbs, and a number of council areas that subsidise golf paid for under threat of court action.
And the ratio of empty properties in London recently reached an all time low.
You are suggesting what precisely?
Are you really saying we keep selling the silver rather than solve the issues?
You may have missed the boat with this.
Take a look at this. And this.
If brand new apartments in prime locations bought off-plan (so no spend on renovation and repair, ideal for buy-to-let) will not sell, has the market finally realised that high prices are unsustainable?
“Foreigners buying UK property is part of what helps the UK to run a trade deficit. If we are to continue enjoying the benefits of this trade deficit, then we should build even more properties desirable to foreign buyers.”
This is an interesting point, and to me illustrates perhaps the most undesirable effect of running a trade deficit, which works quite well for the UK otherwise, in the sense that overseas workers are prepared to knock their guts out all day long producing goods for us, solely in exchange for little portraits of Her Majesty.
Given that the only thing that foreign exporters can do with the Sterling that they earn from us is, a) Exchange it into their own currency (thereby strengthening it vs. Sterling, making their exports less competitive = bad for them), b) Save it (ie ‘lend’ it back to us = no big deal either way), or c) Spend it on UK goods and services (good for cheese, whisky, and Aston Martin exporters), … or non-financial assets, ie property..
This is where, IMO, it gets really problematic; in the face of housing shortages in the capital, it’s perverse to be building huge, glass and steel safe deposit boxes simply for the storage of foreign capital, and using up precious *real* resources (land, labour, energy and materials) that could be far more usefully employed in meeting the real needs of the domestic population, which are currently considerable.
A ban on anyone non-resident in the UK being allowed to purchase property might be a solution; this does exist in some other countries, though I can’t imagine any conceivable UK gov implementing it.
One can hardly make the country’s chief exporting strategy the building in London of empty residential tower blocks for foreigners to provide us with money to buy our imports! At some stage the homeless and destitute will engender a revolt against the Neo-Liberal governments who allow this sort of thing and a substantial number of dumb citizens seem to masochistically vote for.
Based on buildings like the Tower in Vauxhall occupancy rates for foreign-owned apartments are above 3/4 and rising. This is a new development too which always take time to fill. Admittedly they will probably not level off at the same level of occupancy as UK-owned apartments, but all this talk about them being empty is poppycock. Someone is benefiting from living there in the vast vast majority of cases.
And council tax is due whether occupied or not.
But because you can’t put a flat on a shipping container to Shanghai people seem to think it’s a less worthy trade than selling whisky or a car. Yet no-one thinks a Brit is going short of a tipple or an affordable car because a foreigner buys a bottle of Islay or a Nissan. But if a house builder hires some people who build and sell a foreigner a flat then people lose their minds thinking think that’s one less flat for a Brit to live in.
Respectfully, you really are very confused indeed on this issue, starting with your belief that council tax on these properties is a fair contribution to society, and then moving on to your confusion between consumption, investment and speculation, let alone rentierism
You also seem wholly unaware that there is not a market as such in housing in many parts of the country because regulation controls supply. That is appropriate, but when the logic of the regulation is abused – as sale for speculation does abuse it – then society does pay a price. And it is
Respectfully, you are very wrong in other words
Foreigners don’t ‘provide us with the money’ to buy their exports.
Only the UK gov can produce Sterling.
The Sterling that foreign exporters hold is the money that they have earned from us buying their goods.
There’s nothing wrong with them choosing to spend it in the UK – that’s a good thing for UK business and jobs, it’s just such an utter waste of valuable real resources to sell them empty buildings that could be put to far better use.
On the other hand, they’re using their real resources to produce the goods that we buy, so perhaps we can’t really complain.
Every bust is preceded by a boom, so it may all end in tears one day anyway.
Sale for speculation only works because of scarcity. Something that is easily solved with the right will.
Meanwhile the proportion of empty properties in the UK is very low indeed compared to other countries where there is more supply and more affordability
Here’s a nice graphic:
https://twitter.com/notyourcountry/status/647360373591437312/photo/1
For the record, I made no claim as to whether the amount of council tax paid was ‘fair’ – there isn’t a government committee for that. I stated that council tax is due. Clearly a factual claim, and one that appears to make those who would deny people well-paid work building things for foreigners uncomfortable.
A) Is the data right?
B) Have you allowed for holiday homes?
C) Have you correlated with need?
D) So what? The issue remains acute in central London
E) Supply and affordability are of course functions – both being destroyed in the UK by 700,000 empty homes
You really need to make a case
They are not buying commercial properties – they are buying residential. The reason why residential is used as a safe shelter for wealth is because it is so lightly and regressively taxed and the fact that you can’t make anymore land in London (or anywhere actually in the economic definition of land – does this appear in economic textbooks?). As we can see Business Rates are a significant burden and sometimes go up. It would be so very easy to stop this by land value taxation.
I doubt this will ever get Treasury approval, but if it did…. https://www.london.gov.uk/press-releases/assembly/mayor-positive-about-a-land-value-tax-trial
“They are not buying commercial properties..”
Oh… yes, they are!!!
http://www.telegraph.co.uk/business/2016/10/06/foreign-investors-race-to-snap-up-london-commercial-property-aft/
The bigger the bubble the bigger the bust.
Why can’t a future market in housing be setup for investment as it is so successful in other areas. This would get around the limited supply of land and decouple the prices from the actual price of housing.
And how would you suggest that should work?