Foreign real estate investment has pushed up the rise of home prices by more than a quarter in the UK, according to a study by King’s College London (KCL).
Had there been no foreign investment, average home prices would have hovered around £174,000 (US$245,115) by 2014, but the influx of foreign money caused them to go up to £215,000 (US$302,900) in 2014 from £70,000 (US$98,610) in 1999, according to the study.
Much of this growth happened via investments through anonymous shell companies registered in secretive tax havens.
Foreign investment also negatively affected homeownership rates in the UK, according to the study. It not only raised the price of expensive homes, but also had a “trickle-down” effect on the rest of the market, according to Filipa Sa, the KLC senior lecturer who conducted the research.
The study attributes to overseas investment the fact that the UK’s largest price increases were in London and the South-east. Some other cities including Liverpool and Manchester witnessed a similar phenomenon.
An analysis of land registry data showed a direct impact on home prices of sales to overseas companies. For example, a rise of 1% in the share of property sales to overseas companies caused prices in the local area to go up by 2.1%.
The UK government announced recently that those involved in helping shell companies to invest in British property will face up to two years in prison and unlimited fines, if the true beneficial owners of the property are not named on a public register. However, the bill has not yet been tabled in parliament.
Overseas buyers bought 3,600 of London’s 28,000 newly built homes between 2016 and 2016, according to research commissioned by London Mayor Sadiq Khan. Half were priced for first-time buyers at between £200,000 (US$281,700) and £500,000 (US$704,400).