Last week, New Zealand banned non-resident buyers from purchasing existing homes, to make housing more affordable for its citizens. It joins Switzerland, which has also banned non-residents from outside the EU from buying property. Several other jurisdictions around the world, including Hong Kong, Singapore and British Columbia in Canada impose restrictions or surcharges. Political interest is growing in these sorts of measures here: in its 2017 manifesto, the Labour party pledged to give local people “first dibs” on new homes in their area.
New Zealand’s property market is thoroughly overheated. Home ownership rates have dropped from 50% in 1991 to 25% today. In Auckland, average house prices outstrip London, with 20% of homes in the centre of the citybought by non-resident buyers in the last quarter.
Such a policy does not come without risks. Opposition politicians have attacked it as a cynical effort to blame the housing crisis on people with Chinese-sounding names. Non-resident buyers easily morph into foreign buyers, who quickly become foreigners and those who simply look different. It’s not hard to see how a “first dibs” policy could, in the hands of the wrong sort of politician, slip into a hostile environment-style attack on immigrants.
But as long as this is framed as being about overseas buyers, not people legally resident here in the UK, policies to restrict overseas ownership of UK residential property are worth considering. Particularly in London, residential property offers rich pickings to overseas speculators, who bought at least £100bn of property and land using overseas companies between 2008 and 2014, with two-thirds of those purchases made by companies registered in just four overseas tax havens. Luxury flats bought off plan by overseas investors lie empty in the capital, while local workers on modest salaries continue to struggle to get on the property ladder.
By themselves, restrictions on non-resident buyers won’t fix the UK housing market. But they could as part of broader measures to address the fact that too often the purchase of residential housing in the UK is used as a means of speculation rather than to provide somewhere to live. Our economic growth model remains dependent on the consumer-fuelled debt boom that is predicated on rising house prices. For people able to buy and rent out second, and even third, properties, residential housing acts as a lucrative income stream that’s delivered on top of rising asset prices. One in six people aged 55 to 64 owns a second property. Those gains come directly at the expense of those who rent; rising house prices keep them locked out of home ownership for ever longer. Do we really want to live in a society where one of the easiest ways of making a quick buck is through buy to let – invariably to other people’s children?
While the government has taken some steps to make buy to let less lucrative, loopholes still exist. Our special report on second-property ownership reveals how holiday homes are being registered as small businesses to qualify for rate relief. This leads to the astonishing situation where owners of short-term lets are paying no form of council tax or business rates.
So “first dibs” policies or restrictions on overseas buyers should be accompanied by policies that reduce the profitability of multiple home ownership. Second homes, buy to lets and particularly short-term lets should be subject to higher – not lower – rates of tax. In areas of housing shortage, it’s morally repugnant to choose to leave homes empty; the government should insist councils in these areas charge far more punitive rates of council tax on homes left empty for more than six months; at the moment, councils can only charge double for properties left empty for more than two years. Making housing more affordable won’t purely be achieved by building more houses: it requires clamping down on property speculation once and for all, whether by overseas investors or affluent Brits.