The housing minister has poured cold water on plans to restrict entry into the UK residential market for overseas investors, after the Lib Dem leadership proposed a series of changes to foreign investment rules.
Lib Dem deputy leader Simon Hughes has criticised the level of foreign buyers taking new-build London residential properties, which Savills Research said in June made up 60 per cent of new-build purchasers.
He made a number of suggestions to the Conservative housing minister Mark Prisk last month during a debate at the House of Commons, including changes to tax and marketing rules to advantage local buyers.
But a spokeswoman for Mr Prisk this week said he “has no plans to do anything that would curtail inward investment, including restricting market to the UK or giving local residents priority for sales.”
Construction News understands that Simon Hughes’ office has not heard back from the Department of Communities and Local Government on any of his proposals, aired more than a month ago.
Mr Hughes blogged in June that he wished to restrict the purchase of London properties to UK buyers with two exceptions.
“Too many of the homes which are being built are now snapped up by wealthy individuals and companies abroad, often as investment properties”, he wrote.
“The law should be changed so that housing in London can only be bought by people or companies resident or domiciled in the UK, unless it is as a permanent home or they have express permission from the Mayor of London.”
In a Commons debate on the 20 June, Mr Hughes then asked the government to commission research into the issue, and tabled several proposals, including differential stamp duty or council tax, or an annual asset tax on properties owned by non-domiciled individuals from outside the EU.
He also proposed differential council taxes and priority buying powers for people who have lived in the area for a certain period, as well as tax incentives for affordable housing.
The proposals come as the major parties are gearing up the formulation of their 2015 election manifestos.
Mr Prisk confirmed receipt of the proposals in the Commons last month, and said at the time he would respond to what he called Mr Hughes’ “shopping list”. He described the concerns as “perfectly understandable” but pointed out the benefits of foreign investment.
Berkeley Group chairman Tony Pidgley in June defended foreign investment, saying it had “saved” the London residential market.
Analysts welcome Conservative stance
The London Central Portfolio, which carries out research on residential funds and asset management, said they were “delighted” with Mr Prisk’s statement, but that Mr Hughes comments were “still a major concern.”
“This issue needs to be thoroughly debated and supported by competent and numerate statistical analysis as to the implications for the economy and the housing sector”, the LCP said in a statement.
LCP research recently found that an extra £2.8bn would be gained by the Treasury through VAT and Stamp Duty Land Tax through the 83,250-unit inner London residential pipeline, 44 per cent of which is accounted for by the foreign-dominated private rented sector.
LCP chief executive Naomi Heaton said the private rented sector (PRS) was crucial to housing international students, foreign visitors and corporate executives.
“The price of older properties would also have to take a haircut to remain competitive with new-builds. In a repeat of the 1980s crash, this would result in widespread negative equity with devastating consequences when base rates inevitably increase.”