I congratulate my hon. Friend Chris Philp. I did not wish to be unkind to him earlier; the point I was trying to make was that housing in London is a toxic, complicated issue. In many ways, it is one issue on which all of us, as London Members of Parliament, need to try to work together, although there will, of course, be party political differences from time to time.
I hope colleagues will forgive me for focusing my comments not on social housing, which is close to my heart—it is an issue even in my constituency—but on foreign ownership. Property ownership in Britain is a key component of the social capital that enables a free enterprise system to have popular legitimacy and to function effectively.
Foreign investment in London property is so desirable because property here is widely considered to be relatively low risk, while offering high returns. There are a great many reasons for that, mainly stemming from the inclusive and welcoming society created by this nation—our forefathers—over many generations. All this so-called social capital cannot simply be bought; it has evolved over many centuries.
As the international enclave expands in central London boroughs, prices have also been driven up in the outer suburbs. It is getting tough for even the highest paid professionals to buy homes, as population growth exacerbates supply issues. High rent gobbles up funds for deposits, and prices get a boost from artificially low interest rates. There is something very wrong, here in the capital, when hard-working residents, our own constituents, who play by the rules, are completely priced out of their own housing market. These are the sort of people who will maintain and build London’s social capital and pass it on to the next generation. Property developers benefit from that social capital and it is only right that they play their part in preserving it.
Lest we forget, the fundamental purpose of residential property is to house people. It is a precious resource and should not routinely be locked away as part of an investment portfolio. Housing is a key component of every city’s eco-system and it may now be time to consider having residential developments that are open for purchase by only UK citizens and permanent residents. That would to some extent prevent non-resident overseas investors from bringing about what is, despite the honeyed words of Knight Frank and Savills, massive distortion of London’s property market.
Nations such as Switzerland and Singapore have strict restrictions on the foreign ownership of property. Yet they are global players that still operate successfully as financial centres. In Switzerland, only Swiss citizens and permanent residents can own property. The property market is a free market that operates within those rules. In Singapore most Singaporeans live in Housing Development Board properties, which only Singaporeans can own, some of which are by any standards luxurious. Singapore also has unrestricted ownership of non HBD properties—mainly high-cost luxury properties, which are open to foreign ownership. However, high stamp duty and penal capital gains taxes are levied on speculative purchases, if the property is sold within four years of securing ownership. I fully appreciate that for London to remain a dynamic, global city we must continue to welcome people from abroad to live, work, study and build businesses here. They will make an important contribution to our city’s culture. However, that is different from welcoming speculative capital that forces British citizens and other permanent residents who live and work here out of our city.
Another key aspect to examine is the reported reluctance of banks to lend money for residential property developments, so that developers look for off-plan purchasers, frequently in Asia, to deposit 20% of the value of their purchase to allow building to commence. That is an extremely complex issue and I fully acknowledge that, for example, Battersea power station would have remained derelict had it not been for the substantial boost afforded by some of that foreign investment.