First-time buyers face further woes
As new-build housing continues to fall behind government targets, first-time buyers are facing additional issues as a result of foreign investment competition.
The difficulties involved in the house buying process for first-time buyers have been well established due to the ever-widening gap between house prices and wages. In an effort to remedy the disparity, the Tory party took steps to aid those looking to get a foothold on the property ladder by attempting to prevent landlords from purchasing lower-end homes through a stamp duty hike in April last year.
However, thanks to the falling value of the pound due to the decision to leave the European Union, foreign investors have been snapping up new-build developments – leaving precious little for UK residents.
According to The Times, in one particular Manchester development, 265 out of 282 flats were sold to overseas companies or investors; and of the remaining 17, only two were inhabited by UK owners.
With no current enforceable rules regarding the limits of foreign investment in British property, for near future, there is little reason to believe that the situation will change, leading to many prominent industry professionals forecasting a gloomy future for first-time buyers.
For those who are looking to sell their house fast, this may initially seem like good news as foreign investment helps to drive up prices. Unfortunately, the long-term outlook paints a rather bleaker picture.
“Overseas investors are inflating prices across the entire market, meaning most people on average wages will never be able to buy a home,” said Daniel Valentine, an expert on the housing crisis from think-tank Bow Group.
“There is effectively an infinite supply of international money that can pour into the country. There are 63 million potential buyers in China alone.”
As Valentine suggests, due to over-inflated prices, those in older generations with higher priced homes who are looking to downsize may find themselves stuck and unable to sell as younger potential buyers are unable to raise the necessary funds for a deposit. And in a country where the number of homeowners aged between 25-29 has halved since 1990, without historic policy changes, the status quo looks to continue.
Previously, foreign investment had been primarily focused in the boroughs surrounding Greater London, but thanks to properties in cities such as Slough, Brighton, and Leeds that offer a greater return on that investment, financiers have started to branch out into areas away from the capital.
While many experts hope that the British pound will return to its previous value once the furore over Brexit has died down, many are denouncing the method with which investors are exploiting the UK’s strained economy as ‘a scandal’, adding that unless the government acts, the country will soon see a stagnation in the property market.
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