The UK Still Has (Post-) Brex Appeal
It may not have felt it in 2020. In fact, many of us probably wished we were paddle boarding in New Zealand or enviously eyeing Instagram posts from our friends in Australia. But despite our experience of the UK shrinking to the road we live on and the local park, overseas investors have considered it the top hotspot for property investment in 2021.
According to research by international law firm DLA Piper,33% of 500 investors, developers and asset managers surveyed shared their desire to invest in UK property this year.
After such a tumultuous year, one in which the UK hasn’t always come out smelling of roses, this news comes as a major boost, especially in the post-Brexit market.
With investors moving quickly to beat the additional 3%Stamp Duty surcharge set to come into play for overseas investors in April and the availability of a new special visa to British National Overseas passport holders in Hong Kong on 31st January, the first half of 2021 could see a significant surge in interest.
Even beyond the surcharge, however, the motivation to invest in UK property is expected to remain high, with Buy Association citing the fallin sterling, low mortgage rates and a strong property market as ample compensation for the tax increase, while long-term prospects and increasing rental demand paint the UK as a safe haven for investment.
Given how strongly the UK’s property market responded theCOVID-19 pandemic, it should not really come as a surprise that it is receiving increased interest from overseas. Nonetheless, it is still a glowing appraisal of the industry that it is seen as one of the world’s most reliable in times of adversity.
But is overseas investment the best thing for the property market in the long-term?
In an article for The Guardian in October 2020, Simon Jenkins decried the empty properties in London that are bought up by overseas investors and ‘add nothing to Britain’s housing stock’. When there are loud calls for more affordable housing, it does seem counter-intuitive to welcome so many properties to sit dormant for years.
As more people are priced out of living in cities or are lured away by the appeal of more space, cities could become increasingly underutilized as residential areas. Even If investors build portfolios of buy-to-rent properties, this could undermine the government’s goal of turning tenants into homeowners.
Jenkins highlights London’s laissez faire attitude to the implications of overseas investment, citing New York’s requirement of full-time residence for most residential properties, Hong Kong, Singapore and Canada’s Heavy taxes on foreign buyers, and New Zealand’s ban on non-residents owning property.
The other, more low-scale but not entirely trivial, implication of unoccupied portfolios of property, is the lack of cashflow being pumped into the local economy by residents.
And from a purely aesthetic perspective, streets of dark, empty properties feed into a soulless depiction of a city.
Therein lies the catch-22 of overseas investment. It carries the allure of immediate financial gain, often quick transactions with no viewings necessary, ego-massaging headlines and an international spotlight, while also hindering affordable development, the increase of local homeowners and even the upkeep of certain long-forgotten properties.
So, while the news of the UK being considered the hotspot for overseas investment may be the cause for initial celebration and back-patting, it is worth remembering that it doesn’t necessarily align with the government’s initial pandemic pledge to create more affordable housing and create more homeowners.
Likewise, it will be interesting to see whether this forecast continues into 2022, if people continue to leave cities for rural areas and towns.