The New Zealand government said wealthier foreign buyers were helping to push up home prices.
As Britain faces its own home affordability issues, we asked this week’s Marketwatch panel if similar measures should be taken in the UK.
The UK economy thrives from its position as a global hub with millions of people from overseas working, studying, investing or travelling in the UK.
Imposing a ban on foreign ownership could significantly reduce the UK’s attractiveness to overseas visitors.
We’d see such a measure as therefore being counterproductive, hindering the UK economy thereby potentially doing more harm than good when it comes to the finances of everyday UK adults.
There are a number of measures we think should be explored before imposing a wholesale ban on foreign ownership.
Vacant holiday homes or investment properties could be taxed for the period in which they’re vacant, based on the notional rental value, with no expense or interest relief.
This would curtail demand for properties in the market and make more homes available for rent.
The industry also needs to do more to promote the idea and feasibility of homeownership.
By constantly propagating the idea that homeownership is an unachievable goal we could be discouraging individuals from ever attempting to save for a home.
We need to change the conversation slightly, acknowledging that while saving for a home is probably the greatest financial challenge UK adults will face, for many it is an achievable goal if met with commitment, and one they should aspire to.
There are also other more pressing factors beyond overseas ownership that are causing affordability issues in the UK, such as a shortage of suitable homes.
Such a ban in the UK would therefore fail to tackle the root of the issue and could harm the UK economy in the long-term.
In August, the New Zealand government took a bold step and legislated to stop non-residents purchasing residential property in their country.
They are using the tools at their disposal to attempt to control house price inflation that is leaving limited stock and opportunity for the country’s first-time buyers, attempting to take that first step on the ladder.
Having established my business in and around the Cambridge area, I have also seen a high amount of overseas investment, as buyers look for a combination of capital growth, with some return in the way of rental income.
I say ‘some return’ because it has been known for investors to buy property in the Cambridge area, only to leave it empty and to sell once an acceptable growth in value has been achieved.
Further to this, I have seen local estate agents pack their suitcases and take whole developments on tour to the Far East and Asia, with the aim of selling entire blocks of new build flats. All without them being marketed locally first.
Thankfully, the UK housing market is undergoing its own transition, as we have already seen an increase in the number of first time buyers, with over 32,200 mortgages completed in May 2018, up 8.1% on the same month, a year prior.
I certainly feel like we have started to move things in the right direction, but I would like us to go one step further, even just temporarily, and copy the New Zealand model and give our first-time buyers an even better chance of purchasing their first home.
New Zealand is a specific case. When it comes to being popular with Chinese overseas investors, there are only a handful of places that match it – Sydney, Singapore, Vancouver and San Francisco being others.
The currency and networks in these cities have attracted a self-sustaining wave of Chinese investment – causing house prices to rocket.
The UK doesn’t have this ‘wall of money’ problem.
On one hand, the Bank of England estimates that just 3% of buyers are foreign investors – a tiny percentage of the market.
However, other research suggests that property bought by foreign-owned companies, turbo-charges this figure and explains as much as 28% of house price growth since 1999.
With no consensus on the size or impact of foreign property purchases in the UK, it’s hard to judge what, if any, action should be taken.
A total ban would be a massive political and economic statement, particularly in the context of Brexit, but would lead to a material slide in prices.
However, the impact on inward investment, the pound and employment would arguably be worse.
I’m not sure a crash will help more people to afford homes.
That said, we can and should do more.
The best way to improve affordability is to build more, make it easier to move from one home to the next and by doing so, make space for first-time buyers.
We should also look at further rolling out local initiatives currently in play. For example, efforts to increase council tax if a house is empty, as well as councils insisting developers of new-build apartments market properties in the UK first, as a condition of being granted planning approval