Our first-time buyer goes head to head with foreign investors in London
As house prices in London continue to rise, many young Londoners are finding themselves struggling to get on the housing ladder. BBC's London Inside Out followed our member Jess, around the capital as she struggled to find a home she could afford.
February 4, 2014
Inside Out has been to Hong Kong to meet the cash-rich consumers who view property in the capital as a safe investment, and the local first-time-buyers they are competing with.
Estate agent Savills estimates in the last year, as much as 85% of new build property in prime central London was bought abroad.
Every Saturday open home viewings in parts of east London are drawing large queues of people trying to snap up the limited stock. “Foreign money is definitely pushing up the price for Londoners,” according to Nadia Elghamry from London Residential Research. “They come in and have money they want to put in to London as it’s a safe haven. They want bricks and mortar-property”.
In Hong Kong, British estate agents organise property expos for Chinese people wanting to invest in London.
For them London offers good value for money. “It’s cheap. It’s as simple as that! £300,000-£400,000. People can afford it here and offer to pay cash,” says Hoi Cheung from SMART Property Investment.
“The Hong Kong government has put new cooling measures in place to slow down ‘the local property market’ and as Hong Kong loves to speculate on property they have grabbed their money and taken it to London.”
This kind of investment, along with a lack of property coming to the market, is making it increasingly hard for first-time-buyers.
Struggle for first-time buyers
HomeOwners Alliance’s member, Jess Shankleman has been saving for a deposit for years to buy her own place, but she found herself priced out of Walthamstow last summer. Now she’s compromising on her ideal area to find somewhere she can afford in Forest Gate.
“I think once Crossrail comes to Forest Gate people will realise the value of Crossrail and that you can get to Liverpool Street and Paddington.”
Her father Martin Shankleman, who is a director of the HomeOwners Alliance, says young buyers from London are being frozen out of the market.
“When I go to a repossessed one bed in Forest Gate and learn a Chinese investor was there yesterday offering cash to buy the property it doesn’t seem right… It is incredible my daughter is now being priced out further and further.”
The Mayor of London, Boris Johnson, has been a champion of overseas investment in the London property market, arguing the money has driven new development.
But in a speech in January, he said his first concern is homes for Londoners: “I do want to see these homes marketed first – or first equal – to Londoners. Isn’t that reasonable?”
“I also hope international investors will understand that we want to see new build homes that they buy lived in. My view is that London homes aren’t some sort of new global asset.”
In his autumn statement, the chancellor George Osborne announced that foreign buyers would have to pay tax on the value added to UK properties they own for the first time.
Mr Osborne said: “It’s not right that those who live in this country pay capital gains tax when they sell a home that is not their primary residence – while those who don’t live here do not.”
Paula Higgins, chief executive of HomeOwners Alliance, believes that the government should go further: “Why do we continue to treat those who want a roof over their head in the same way as those looking to make a profit? We should be scrapping stamp-duty for homebuyers, and get it paid for by investors”
But Miles Shipside from Rightmove thinks the situation is unlikely to improve anytime soon for first-time-buyers in London.
“Nationally you need first time buyers but London is pretty unique. The first time buyer has been replaced by the investor – both overseas and UK based.”
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