Overseas investors who buy new-build apartment ‘off plan’ are effectively helping to create more homes for local people, according to new research from the London School of Economics (LSE).
The study found that international investors have a positive impact on London’s property market. Pre-sales to international buyers allow developers to build faster with the results that more homes become available, both at ‘affordable’ and market prices. Meanwhile international investment also helps to bring vacant sites into use and speed up development on larger sites.
The research, based on information from developers and international estate agents, suggests that over 70% of units were bought to let and would therefore be available to local people. In other cases, they were bought for family members, usually students, to stay in or for the investor’s own use when visiting London. Just a small minority of homes was used only occasionally and there was almost no evidence of homes left permanently empty.
The research indicates that fewer than 20% of new-build apartments in London are sold to overseas buyers, therefore the direct impact on prices was limited. Londoners were denied access to only 6% of apartments as a result of overseas buyers but the LSE says this was “more than offset by the positive impact of pre-sales on the speed and volume of new construction of both private and affordable new housing”.
Matt Lavin of Benoit Properties International says: “The LSE study clearly demonstrates what agents have known for some time, that in terms of the number of new homes built, locals benefit from overseas buyers. While the report focuses on London, the same will hold true for the key regional cities which have increasingly become a focus for investors’ attention and where housing shortages are also a major problem.”
Meanwhile, the latest figures from Hometrack show that UK city house prices rose by 5.1% during the year, and have accelerated in the last three months. Large regional cities recorded the biggest gains over the last quarter – Birmingham (3.8%), Nottingham (3.8%), Manchester (3.3%) and Newcastle (3.5%). It says the slowdown in the London market is bottoming out, with prices up 3.3% over the past year, and there is ‘potential for material upside for city house prices outside southern England’.
Matt Lavin added: “House price growth is underpinned by supply and demand. For years the UK has been building too few houses to keep up with the population. In the year to the end of March, almost 148,000 new homes were completed, when according to the government’s own figures, it needs to be building 225,000 to 275,000.
“Foreign investment is playing a key role in funding vital housebuilding, but it is still not enough to keep up with the growing demand. Therefore we expect prices will continue to rise in the years ahead.”
