Foreign-Owned Uk Property

Part of the debate – in the House of Commons at 5:19 pm on 20th June 2013.

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Photo of Mark Prisk Mark Prisk The Minister for Housing 5:19 pm, 20th June 2013

I congratulate Simon Hughes on securing a debate on this important matter and on offering, as usual, a range of ideas. I received his shopping list—thankfully it was not confused with Mrs Prisk’s shopping list, which might have been awkward—and take it in exactly that vein, as a set of positive suggestions. It recognises some of the challenges, some of which I will seek to answer. I also undertake to reflect in detail on his list’s itemised elements, rather than seeking to do so in the remaining 11 minutes.

The right hon. Gentleman has a strong record of speaking eloquently and frequently about housing stress in London. I will preface my remarks by looking at the housing market as a whole and then focus on the question as it relates to London, because I think that is where the heart of the problem lies. For too long now, regardless of which party has been in government, our housing markets have been dysfunctional. From my political background, and my professional background as a surveyor, I think that this country has probably built only half the homes we need year on year for perhaps a generation.

As the right hon. Gentleman rightly said, that has caused a long-term housing shortage and, with it, significant social problems, and that is especially true in Greater

London. That is why the coalition Government are determined to take a different approach. Our housing strategy seeks to be comprehensive and to address both supply and demand and both freehold and leasehold, and it seeks to start to reverse the loss of 421,000 affordable homes that, sadly, we saw under the previous Administration. It is why we are reforming the planning system to speed up the development process, why we are unlocking large sites to create lasting settlements, and why we are building over 170,000 more affordable homes. It is also why we are seeking to create a bigger and better private rented sector that gives tenants greater choice and quality.

At the same time, we are supporting demand for new homes through the Help to Buy equity loan scheme. Boosting demand matters, especially after the record lows of recent years. I believe that not just because I am a passionate supporter of home ownership, but because a rise in demand gives builders the confidence to accelerate building and can boost overall market supply, including of affordable homes. That is an important point about how the flow of cash and investment helps the market as a whole, a point I will return to in the moment.

On the specific question of foreign investment in housing, it is natural to look principally at London. We have to recognise that London, as the right hon. Gentleman correctly said, is a truly global city; perhaps it is the global city. It has not only the fastest growing economy and population in the UK, but immense international appeal. I think that Members on both sides of the House recognise that as a highly desirable position to be in.

London’s success is in part the result of our open and free markets. Being a global city brings many economic benefits, with wealth creation and inward investment in jobs. Only a week or so ago the Mayor announced the securing of £1 billion of Chinese investment in the area that used to be covered by the old London Docklands development corporation but is now an enterprise zone, which is a very welcome long-term investment. The preparedness of others to invest here is a vote of confidence both in this country’s current economic strategy—that of the coalition—and in London’s future. I think that that openness is also vital to the character of London. It is a diverse city with a fantastic range of influences and cultures, and that is something to be welcomed.

As a result of that, the housing market in London is quite different from the housing market across the rest of the country. Across the rest of the UK, domestic demand has suffered, with mortgage constraints and the difficulties builders have had in securing development finance, but in London the availability of foreign investment has kept development going. It has generated the cash flow that developers need to progress schemes.

The right hon. Gentleman mentioned research. A recent report by the Greater London authority looked at barriers to housing delivery. It estimated that in prime London markets—the very highest—up to 75% of buyers are from overseas, and across London as a whole approximately a third of buyers are foreign. The report goes on to note that

“construction activity demands investor sales—many, if not most, major London residential schemes only commence due to the expectation of the sale risk being mitigated by the chance to sell to UK-based and overseas investors.”

We should also pay attention to what developers say. Tony Pidgley of Berkeley Homes recently said that to try to curtail foreign investment sharply is unrealistic, because it is only through such funding that Berkeley and others can build more homes and affordable homes. Before turning to the specific matters raised by the right hon. Gentleman, I will quote Tony Pidgley, who says:

“Basically most sites that Berkeley are building are a third affordable, a third goes abroad, and a third to the UK market”.

He goes on to say that without foreign investors,

“London would be worse off and we would have fewer affordable homes and fewer private homes.”

I say to the right hon. Gentleman that I totally understand the sense of frustration and challenge that local authorities and, indeed, local people may feel about this issue, but if we seek to curtail inward investment in a crude or ill-defined way I think we can both agree that it would lead to a significant set of unintended consequences.