London has always been a property hotspot, and it is now a magnet for foreign investors who are snapping up properties as investment opportunities.
A survey carried out for Mayor of London, Sadiq Khan, has revealed that many investors from overseas are now buying properties that are suitable for first time buyers.
These are being used in the most part as buy to let property investments and often hold them in offshore tax havens.
Many of these foreign investors originate from countries such as Hong Kong and Singapore, and between 2014 and 2016, they purchased 3,600 of the 28,000 newly built homes in the capital. Around half of these were priced between 200,000 and 500,000, which was targeted at the first time buyers market, given that the average first time home in London costs 405,000. In addition to this, a third of new homes in Westminster, Kensington and Chelsea and the City were also sold to overseas investors.
Sadiq Khan and the London boroughs are so concerned by this trend that they have called for blocks on foreign buyers until Londoners themselves have had an opportunity to buy. Seen as unfair, many are alarmed that this housing is not going to the buyers it was intended for.
One in eight of all new homes being constructed in Tower Hamlets, Greenwich and Wandsworth are being purchased by foreign investors.
Of the residential properties being bought by foreign investors, 70% are purchased as rental investments, whilst 15% were bought by businesses. A sixth of these were based in the well known tax havens of the British Virgin Islands, Channel Islands, Isle Of Man and the Cayman Islands.
Mayor Of London
Increasing pressure has fallen onto the shoulders of the Mayor Of London, largely from his own housing board who feel he should ensure that more homes are made available to Londoners first. They have called for particular measures to focus on homes priced for first time buyers.
Sadiq Khan has expressed his concern at the matter, and has pledged to keep the supply of affordable homes as his top priority. Nonetheless, he also understands the important role played by international investment, which provides developers with the finance they need to continue to increasing the supply of homes in the first place. Khan is yet to announce the measures he intends to put in place.
This is not an isolated incident, as the trend now also seems to be spreading to Manchester.
Research has shown that much of Londons largest residential development required overseas investment to get it off the ground. London has long been an attractive area to foreign investors, and has shown to be somewhere safe to keep their money, particularly if the buyer originates from a more unstable region. However, this has lead to concerns are using London homes to hide the proceeds of corruption.
With new apartment complexes in Southwark and Elephant and Castle being bough entirely by foreign investors, concerns are still being raised about the levels of investment being made and the potential under-occupancy of those properties.
Whilst foreign investment is necessary for any city, it is important that the residents of that city have somewhere to reside and so measures will need to be carefully considered to strike the right balance.