Fixing our broken housing market

For many years, the news has been awash with facts and figures about the shortage of housing in the UK, a shortage that inevitably pushes prices ever higher.

The focus on this problem becomes heightened at each General Election campaign and the 2017 campaign was no different with each party seeking to outbid the other with unrealistic house building targets that inevitably won’t be met as has been the case for decades under Governments of all political persuasions.

In 2015-16, the total housing stock in England increased by approximately 190,000 residential dwellings. Although this was more than 10% higher than the previous year it remains some way off the estimated 240-250,000 new homes needed.

Punishing land banking house builders, addressing the effective monopoly enjoyed by the big house builders, giving local authorities more powers, freeing up part of the green belt, applying punitive taxes – for example an additional 3% stamp duty on second homes – and many other solutions have been put forward over the years with varying degrees of success. None has proved particularly effective.

The Government’s Housing White Paper, Fixing our broken housing market, published earlier this year, extends to over 100 pages of proposals about how to deal with the problem of supply and consequent cost. However, it makes no mention whatsoever of one approach that never appears to receive any serious attention – restricting property purchases to UK residents. Irrespective of nationality, it would make sense if the purchaser of a UK property resided in the UK.

Put simply, it doesn’t matter how many houses are built in the UK, there will never be enough to meet demand because demand is not simply coming from the 65m currently resident in the UK but from across, Europe, Asia and America.

Years of London property purchases by the super-rich from Russia, China, America and various other countries are well documented but it’s not just London that overseas investors are setting their sights on. Liverpool, Manchester and other parts of the UK are proving equally attractive.

What’s more, it is no longer the super-rich alone who are snapping up properties across the country. Middle income earners from across the world, especially China, are finding UK property an increasingly attractive proposition. This has been exacerbated the weakness of sterling following Brexit.

Perhaps the most frustrating aspect of this phenomenon is the fact so many of these properties are bought solely as investments rather than as homes or even as rental properties. In other words, they sit empty, appreciating in value whilst huge numbers of British residents become priced out of the property market, are forced to rent, to live with friends and family or to join the ranks of the 4,000+ rough sleepers on our streets.

Would some restrictions requiring purchasers to be present, be so radical? The Government could establish a cross party group to examine this possibility. This would go some way to taking any political heat out of the proposal.

Furthermore, there are plenty of international examples to demonstrate this can be done effectively.

Property can only be purchased by residents in Singapore and Iceland. Others impose less rigorous but arguably sensible restrictions. Non-residents in Poland, well those from outside the European Union anyway, must obtain permission from the Ministry of Internal Affairs to purchase a home. This permission will only be granted if they have either lived in the country for five years or more or can demonstrate some other form of significant connection to the country e.g. marriage to a Polish citizen. Similarly, Denmark and Hungary impose some limits on who can buy property within their borders and Australia has imposed some restrictions as a direct result of an explosion in overseas property acquisitions, primarily from China.

Critics will argue that Government shouldn’t interfere in the market, that imposing some sensible restrictions in this area threatens the important message that Britain is open for business or that it could be damaging for our successful property market. Scratch the surface and these arguments fall away. Take the first and third arguments, Governments often interfere where markets are not working properly and few would argue our housing market is working well. Britain is open for business, move here, contribute and there will be nothing to stop you buying a home.

What do you think? Should eligibility restrictions be imposed on home buyers or not? Let us know by completing the AAT Housing Supply Survey 2017. It shouldn’t take more than two minutes.

Phil Hall is AAT's Head of Public Affairs and Public Policy.