As we await the outcome of one of the UK’s most comprehensive inquiries into the impact of foreign investment on London’s housing market, Iceni Projects Ltd takes a closer look at the current climate and what this means for the London market.

Firstly, looking at the scale of overseas investment, the Department for Communities and Local Government (DCLG) do not actually monitor these figures. The Land Registry also hold data on the ownership of property by overseas companies, however, not all of this data is publicly available. This is something that is hoped can be made possible following the outcome of the inquiry. Whilst this isn’t ideal, estate agents have instead carried out their own market research in this area, with a focus on London.  Savills estimate that within the high-end ‘Prime London’ market, 32% of buyers are international.

So, who are actually investing and buying? According to Knight Frank, the Chinese are the biggest buyers of new-build residential accommodation globally, with Singaporeans second. However, taking a closer look specifically at who owns London, business webpage ‘London Loves Business’ recently released a list of the top 10 freehold landowners in the capital. In descending order:

10. Network Rail
9. Legal and General Group
8. BNP Paribas
7. Segro Plc
6. The Queen’s Most Excellent Majesty in Right of her Crown (Crown Estate)
5. Government of the United Kingdom
4. Aviva Plc
3. Transport for London
2. The Mayor and Commonalty and Citizens of the City of London
1. The Government of Qatar

What makes London attractive to overseas investors? Firstly, there are no restrictions on foreign ownership of residential property in the UK. There are, however, rules in place to ensure tax is paid to the UK government when purchasing property as well as in relation to any rental income received. Furthermore, there have also been changes to Stamp Duty Land Tax (SDLT) to target non-UK resident landlords purchasing high value residential properties. SDLT on commercial property has also been reformed so that the tax would be charged on a ‘slice basis’ similarly to residential property. Notwithstanding the above, there remains a surge of attraction to the London market from overseas. Particularly after a post Brexit weakened pound.

Whilst investment from around the world is welcome, the key concern is that the overseas investment in the London market is pushing up demand and house prices where supply is constrained, making it increasingly difficult for first time buyers to get onto the property ladder. Furthermore, the increase in demand pushes up land prices resulting in impacts upon viability of developments and, as a result, we experience a reduction in the provision of affordable housing.

Research carried out by the Smith Institute (left-wing think tank), whose 2013 report argued for action to curb ‘speculative overseas investment’ in the form of a property speculation tax cited that around 85% of new-build properties in central London and 38% of re-sales are estimated to have been purchased by overseas buyers. Whilst there are no records of such figures held by DCLG, it would be particularly interesting to further research whether these properties are being classed as main residence accommodation or whether they are let out to London residents from an ‘overseas’ landlord. Perhaps this information will be revealed following the outcome of the inquiry.

Regardless of speculation, the London Mayor has said that the inquiry launched aims to “shine a light on who is investing and where the money originates from”.  In light of Teresa May’s recent Brexit announcements and further uncertainty regarding stability of the pound, enabling the London market to appear further attractive and cheaper, the outcome of this inquiry will provide an interesting time ahead for those overseas investors taking advantage of the current climate before any possible, planned restrictions are tabled.