In recent years, the UK has become an increasingly attractive inward investment opportunity. In the past 10 years, property investment from foreign companies into the UK’s regions has outstripped EU countries such as Germany, France and Spain.
With billions of pounds coming into the UK property market from overseas, this, according to new research, has bumped up house price growth by more than a quarter. A study by King’s College London shows average prices across England and Wales rose from £70,000 in 1999 to £215,000 in 2014. It’s estimated that they would have risen to £174,000 without an injection of overseas property investment, which shows that 28% of house price growth over that period could have been down to foreign companies.
The King’s College London study also found that overseas investment is a factor in reduced homeownership rates. Although the research makes it clear that foreign investment doesn’t simply raise the price of expensive homes, and that it’s more of a trickle-down effect on the rest of the market. It’s this effect that has an impact on the market as a whole, as overseas property investment has links with lots of big cities in the UK. And although this type of investment has mainly been concentrated in London and the South-east, and it’s these places that have seen the largest price increases, other cities such as Liverpool and Manchester also have a history of attracting foreign property investors.
Research into the effect of foreign money on the housing market was commissioned last year by London Mayor Sadiq Khan. The findings revealed overseas property investors bought up 3,600 of London’s 28,000 newly built homes between 2016 and 2016. With half of those supposedly priced for first-time buyers. This research, along with information gathered from key players in the property sector, shows the concern about high-value homes owned by investors from around the globe. This has put pressure on the Government to do more to crackdown on ownership of property through foreign shell companies (non-trading companies used as a vehicle for various financial manoeuvres) and forced its hand to create new laws.
New laws will mean foreign companies must be transparent. With the beneficial owners of the property must be named in a compulsory public register. Frontmen of shell companies who don’t comply with this could face up to two years in jail and unlimited fines. But there are concerns by some as draft legislation on this has not been introduced to parliament yet, and any new rules will not be implemented for another three years -until 2021.
Foreign investments and the North West
So what does all this mean for the North West? Liverpool and Manchester are big cities in the region and have a history of foreign investments regarding residential and commercial property. The issue of shell companies and extremely high-value homes are not of concern as they are in certain areas of London.
Like anywhere else in the country inward property investment is not necessarily negative. Many schemes, projects and constructions simply wouldn’t be possible without it. A good example is Liverpool’s lengthy and successful relationship is with China and Shanghai. Here we’ve seen residential and commercial property builds resulting in jobs for local people and homes for the city. The same can be said of Manchester. Its inward investment agency MIDAS, shows how it supported the creation of 4879 jobs in Greater Manchester during 2016/17, forming an estimated economic impact of £290.4m.
From the figures above its clear that inward investment is essential if any city is to be a player in the global market. But, it’s about balance. This is key. It’s key in terms of prosperity. What’s right ethically for the region, and how the North West work with foreign property investors to continue to prosper.
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