Overseas money is keeping London house prices high and making it difficult for first-time buyers to compete with foreign money “being parked here” according to a leading estate agent.
Speaking to FTAdviser, Chestertons' area director Amy Reynolds said that despite increases in stamp duty, overseas investors still see property in London as a safe investment and as a result are adding pressure to the first-time buyers market.
Reynolds said she was concerned by this trend and that first-time buyers are left unable to compete with the inflow of overseas money.
In Reynolds' view, while the government has taken some action to address the issue, it needs to do more.
She said “The government needs to look at the international property market and say ‘that’s fine if you want to buy here, but if you aren’t going to live here then you need to pay more.’
“This would help make the market more normal and help ensure that everyone can have a home.”
In addition to this, Chestertons’ managing director Richard Davies said the imbalance of supply and demand, with housing stock currently far lower than what is needed, was a key pressure on house prices.
Chestertons compared May 2022 to the same month the previous year and saw a 57 per cent uplift in buyer enquiries while the number of available properties to buy has shrunk by 14 per cent.
According to the Halifax house price index, UK house prices increased again in May, with the average now standing at £289,099.
In London, which has seen the strongest inflation over the past decade, the average cost for a property has reached £541,942.
“As the UK’s capital, London’s property market remains a hotspot and attracts a wide demographic of property buyers.
"Our branches receive enquiries from families, couples and investors but, particularly post-pandemic, we are seeing an uplift in the number of international students, international buyers as well as office workers who require a pied-à-terre closer to work,” Davies said.
To offset the shortage, the UK needs to be building 340,000 new homes a year, of which 145,000 should be affordable. However, only approximately 216,000 new homes were supplied in 2020-21.
FJP Investment’s chief executive Jamie Johnson said last month that foreign investment in the housing market can be a huge positive when considering the slowdown of construction activity due to problems associated with the pandemic.
“More often than not, news of international investment flows into the UK property market is met with some disdain due to negative connotations linked to the housing shortage.
"However, foreign investment can ensure the commencement of property development by buying new residential units off-plan and funding development schemes,” he said.