Foreign-Owned Uk Property

Part of the debate – in the House of Commons at 5:00 pm on 20th June 2013.

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Photo of Simon Hughes Simon Hughes Deputy Leader, Liberal Democrats 5:00 pm, 20th June 2013

The hon. Gentleman makes a good point. We do not always agree, but he makes a good point. Many of the properties that are being built are specifically built with the probability that they will be sold easily in the foreign market. These are not family houses; these properties are mainly flats, often studio, one-bedroom or two-bedroom flats—small flats—which will either be buy to rent, will be used occasionally by somebody from abroad who might come here a couple of times a year on business or will be just kept as an investment. There is evidence that a lot of these places have nobody in them at all; they are simply bought as an investment in this country and will be sold later at a higher price. I agree with the hon. Gentleman.

I checked the Office for National Statistics figures today. The average house price in the UK this year is £238,000, in London £414,000 and in my borough £389,000. Median employee earnings monthly in the UK are £505, in London £613 and in my borough £630. It will not surprise anybody in the Chamber to know that the gap between earnings and cost is growing and growing, and London is the place where the difference is greatest.

In London, just to keep pace with demand, best estimates suggest that we need at least 50,000 more homes each year, twice as many as are currently being built, and 20,000 a year more than the Mayor of London’s target. Central London, which for housing purposes often includes part of my borough and my constituency, is now an area where, according to the best figures, more than one third of all buyers are from overseas, and two thirds of all new-build property is sold to non-UK purchasers—a third of the total and two thirds of the new-build property. Over a third of properties are sold to companies from China and the Asia-Pacific region, more than one in 10 to buyers in the middle east and north Africa, and about 8% each to purchasers from western Europe, and to eastern Europe and the former Soviet states.

I understand why London is a popular place for investment—the value of the pound, the fact that it is outside the eurozone, very low interest rates, and the fact that it is a world-class city with English as its main language. According to Knight Frank, average prices in prime property—property priced at more than £1 million —in London have risen by 50% from 2009 and more than 7.5% in the past 12 months alone. Compared to New York or Singapore, it is clearly a much more successful investment. Some purchasers buy these homes to live in, some to let, some as a home additional to their principal home or as a third home, and some buy simply as an investment.

These purchasers are on to a good thing for them, and the developers who sell to them are on to a very good thing for themselves as well. Developers find foreign purchasers—this relates to the question from Mr Slaughter—often more willing than UK purchasers to buy straight from plan. They pay their money up front, which helps fund the development as a whole. London property commands good prices in the global market, so this maximises the returns and therefore the profits of the developers. It is a very successful response to international housing demand. It does not help the people I see in my surgery every week who want a first home or a home they can afford.