London’s overseas property buyers – debunking the mythsJune 15, 2017
Steve Cole, Housing Policy Director, London First
The role of overseas buyers in the London housing market has been a press staple over the last couple of years, and the source of much speculation. In 2016, the Mayor commissioned research into the issue to explore: the proportion of new build homes purchased by overseas buyers, the extent to which those properties are occupied, and how important overseas buyers are to the financing and construction of new homes.
The resulting two reports for the Mayor by the LSE and the University of York debunk the urban myth that the majority of new build homes in London are snapped up by overseas buyers and left empty. In response to the research, a sub-group of the Homes for Londoners (HfL) board has made several recommendations about action that should be taken.
Key findings of the research:
• Sales to UK-based buyers accounted for nearly 90% of all new build property sales in the sample between April 2014 and March 2016;
• Almost no evidence was found of homes purchased by overseas buyers being left entirely empty, the report estimates this at 1% or less of new homes;
• At least 70% of homes bought by overseas buyers were likely bought as rental investments. A very high proportion of homes bought for rental purposes were let out, with occupancy rates of up to 95%; and
• Almost all of London’s very large residential development sites have needed overseas investment to get them underway.
Key recommendations from HfL sub-group:
• The Mayor should take steps with the London homebuilding industry to make more new homes available to Londoners before anyone else. Measures should focus on homes sold for prices that Londoners, especially first-time buyers, are more likely to be able to afford;
• The Mayor should agree, with collective input from the homebuilding industry, a common basis to collect data on the occupancy of new homes which can be shared with the GLA and act as an evidence base to assess what future measures may be required;
• Government should ask the HCA to remove restrictions on its Help to Buy rules so that the period during which homebuyers can purchase a home through the scheme is limited only by their mortgage offer period;
• The Council of Mortgage Lenders, homebuilders and regulators should convene a working group to review the regulatory framework with a view to increasing access to mortgage offers with longer standard terms.
London First has been, and will continue to engage with the GLA and members to help shape policy in this area, particularly any proposals relating to the so called “First Dibs for Londoners” policy originally advocated in the Mayor’s manifesto. While the Mayor is right to look at what can be done to help Londoners get a foot on the housing ladder, the key issue is that not enough homes are being built in the first place. Restricting access to who can purchase a home does nothing to tackle the fundamental issue of a lack of supply.
The full reports considered by HfL on overseas buyers can be accessed here under agenda item 8b