Research for Mayor of London Sadiq Khan shows first time buyers in the capital are losing out to overseas investors acquiring property.
New build homes in London aimed at first time buyers are being bought by overseas transactions and 3,600 acquired from buy-to-let investors between 2014 and 2016.
From the total 28,000 new build homes in the capital only 87% were UK buyers and half aimed at first time buyers priced at between £200,000 to £500,000.
Overseas transactions increased to 36% for central London properties such as the City, Westminster and Kensington & Chelsea with 70% intended for rental investments.
Majority of investors from Asia
The research from University of York, LSE and data from Land Registry suggests that 61% of the buyers of Central London properties are from Asia in particular from Hong Kong, Singapore, Malaysia and China as the following table shows.
| Investor location | Proportion |
|---|---|
| Hong Kong | 28.0% |
| Singapore | 20.1% |
| Malaysia | 7.5% |
| China | 5.4% |
| Channel Islands | 5.1% |
| British Virgin Islands | 3.2% |
There were 14.9% of property sales using companies including offshore tax havens such as Channel Islands, British Virgin Islands, Cayman Islands and the Isle of Man.
In terms of London Boroughs the highest proportion of sales to overseas investors were the City of Westminster with 11.0%, Tower Hamlets on 9.6% and Greenwich with 9.0%.
In terms of locations, only 5% of new developments at the beginning of 2017 were in Central London with 57% in inner London and 38% in outer London.
Tower Hamlets, Greenwich and Wandsworth were the boroughs with the highest number of homes being developed and account for 30% of all new builds in the Capital.
Overseas investors may make it difficult for home movers to buy if property prices rise and the availability of suitable homes decreases.
For older remortgage buyers forced to repay an interest only mortgage, the lack of suitable homes could prevent them from downsizing and they can agree a lifetime mortgage instead.
Rising house prices in London allows the equity release buyer to access money with a lifetime mortgage and use this to consolidate debt, for home improvements or holidays.
Action to put Londoners first
As a result of the findings the research recommends action to be taken by the Mayor of London to make new homes available to Londoners before anyone else.
Measures should focus on homes sold for a price Londoners and In particular first time buyers can afford.
The research showed that the lower values, 66.5% of UK owners paid between £0.2 million and £0.5 million. Of the overseas homes bought 50.5% were under £500,000 and competing with Londoners.
In general overseas buyers bought higher value properties with 32.5% paying between £0.5 million and £1 million compared to 25.2% for UK owners.
The median cost of a home for first time buyers in London was £415,000 according to the University of York report compared to overseas owners median price of £500,000.
There was also evidence of long term vacant homes and all boroughs should levy an empty homes council tax premium to ensure all new build homes in London are occupied.
What are your next steps?
Call our LCM mortgage brokers if you are a buy-to-let landlord with a property, remortgaging and want the best mortgage deal, buying your first home or you are planning to move home.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your home to spend on holidays, home improvements or gift to a child or grandchild the deposit on their first home.
Learn more by using the mortgage monthly cost calculators, property value tracker chart and equity release calculator. Start with a free mortgage quote or call us and we can take your details.
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