First time buyers lose out to overseas investors as pound falls

The current system of stamp duty means a purchaser buying a £1.5 million apartment in Mayfair would have to pay more than £138,000, including a three per cent stamp duty surcharge on buy-to-let properties. However, by spreading the same investment on about six cheaper flats of £250,000 each, the bill is reduced to £60,000 — a saving of £78,000. Link.

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One of the unforeseen consequences of the falling pound has meant UK first time buyers can't compete with overseas investors who are now buying up cheaper properties in and around London.

A range of articles on this issue:

Brexit sparks overseas spending spree in London property - BBC News

London housing: Foreign investors buy up flats in suburbs after stamp duty hike | London Evening Standard

London property prices are falling because of Brexit | The Independent

I don't have a problem with overseas investment but first time and many UK based buyers looking for homes rather than investments are waiting to buy while there is economic uncertainty however cash rich overseas investors can take advantage of the stamp duty changes designed to help first time buyers.

Crazy, what solution do you think we should have?

Foreigners and the Londonian real estate are not a new problem. But is it really a problem? The article seems to focus on peculiar rich neighborhoods. In general what share of properties are we talking about, after excluding those actually rented to your people and businesses? Anecdotally and ironically, I heard a few French people complain about the Englishmen buying properties in France. I do not think this is a significant problem anywhere though, and the problem in London may be on a different scale.

If it really is a problem, just tax purchases made foreigners (and their corporate shells). I do not see an ethical problem with that.

One last word: I am not familiar enough with London, but the expensive real estate in Paris results from the lack of deep structural changes in Paris' regional urbanism. What used to work is no longer enough, and this would take high investments to fix. We are seeing significant progresses ("Grand Paris" project), but not enough and this sort of things takes a few decades. What about London's urbanism, is it on par with the needs of London in 2016?

Infinite Chaos said:

One of the unforeseen consequences of the falling pound has meant UK first time buyers can't compete with overseas investors who are now buying up cheaper properties in and around London.

A range of articles on this issue:

Brexit sparks overseas spending spree in London property - BBC News

London housing: Foreign investors buy up flats in suburbs after stamp duty hike | London Evening Standard

London property prices are falling because of Brexit | The Independent

I don't have a problem with overseas investment but first time and many UK based buyers looking for homes rather than investments are waiting to buy while there is economic uncertainty however cash rich overseas investors can take advantage of the stamp duty changes designed to help first time buyers.

Crazy, what solution do you think we should have?

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I do not think I would worry about London real estate prices right now. They have been going up and down since before I was born and are among the most volatile I have run into. What a Brexit might bring is totally unknowable at this point, but for many decades it has been the iron rule that the Prices were much higher for the onetime first buyer, when she later sold the estate.

joG said:

I do not think I would worry about London real estate prices right now. They have been going up and down since before I was born and are among the most volatile I have run into. What a Brexit might bring is totally unknowable at this point, but for many decades it has been the iron rule that the Prices were much higher for the onetime first buyer, when she later sold the estate.

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The problem isnt the real estate market going up or down but the currency itself, which hinders all those getting paid in that currency. A temporary tarrif till the Brexit shakes itself out would probably be advisable.

Build more affordable housing...

Crovax said:

The problem isnt the real estate market going up or down but the currency itself, which hinders all those getting paid in that currency. A temporary tarrif till the Brexit shakes itself out would probably be advisable.

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I can see the argument but am not sure it is the best way. Currency should fluctuate and government knows no better, where the price should be, than do the traders and economists in the trading and board rooms around the world. Government should be restricted to structuring external effects and providing true public goods. Besides that, they make the same mistakes we all do only because of their size with much more potential of destruction. That is, what has happend with the EU. They undertook a number of jobs that they miscalculated and structured badly. Because of the size of the operation the mistakes have destroyed millions of lives. SO, nope. I do not think I will follow you here.

PeteEU said:

Build more affordable housing...

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How difficult that is to do is being lived in Germany. Even where they have practically no old buildings left and therefore architectural ensembles that require protection, the zoning laws prevent building enough residential space to bring down prices. Also the regulations resulting from things like fire hazard, greenery in built-up areas or CO2 conservation are major drivers in high price-tags.

joG said:

How difficult that is to do is being lived in Germany. Even where they have practically no old buildings left and therefore architectural ensembles that require protection, the zoning laws prevent building enough residential space to bring down prices.

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Excuses except the zoning laws issue. There is plenty of room to build, both in Germany and the UK. However zoning laws often prevent single room cheap housing from being built, because local government does not want that type of tax payer in their area.

Also the regulations resulting from things like fire hazard, greenery in built-up areas or CO2 conservation are major drivers in high price-tags.

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LOL more excuses that are lame and false. Yes lets build fire hazard half falling down housing to house all the middle class and poor. So what if they use 40% of their income on heating during the winter, their home is cheap!

One of the main problems for British pensioners is the cost of heating, because so many British homes are so ****ty insulated. You dont have that problem in Scandinavia or Germany funny enough, and yet housing is more expensive in the UK..

joG said:

How difficult that is to do is being lived in Germany. Even where they have practically no old buildings left and therefore architectural ensembles that require protection, the zoning laws prevent building enough residential space to bring down prices. Also the regulations resulting from things like fire hazard, greenery in built-up areas or CO2 conservation are major drivers in high price-tags.

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yeah - something that pisses me really off. Even in private everything here is ruled. If I will leave this Country one time, that will be the reason. I am not alowed to build a cabin in my own Forrest!

In our big cities - and I think it´s all over Europe the same - there is another Problem, that may affect this topic, too. Investors. They buy cheap houses in Berlin, Munic, Hamburg etc - renovate them and let them for such high prices that normal citizens can´t afford. If the houses get cheap for foreigners in London, exact that will happen even more.

german hick said:

yeah - something that pisses me really off. Even in private everything here is ruled. If I will leave this Country one time, that will be the reason. I am not alowed to build a cabin in my own Forrest!

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Comes again down to zoning laws. It pisses me off as well, but at the same time I do understand some of them. For example height restrictions. The biggest problem in my opinion is rules that prevent using shop fronts as apartments or business addresses to be converted to homes. We got plenty of vacant business addresses, pretty much everywhere, and yet are not allowed to use them as homes.

In our big cities - and I think it´s all over Europe the same - there is another Problem, that may affect this topic, too. Investors. They buy cheap houses in Berlin, Munic, Hamburg etc - renovate them and let them for such high prices that normal citizens can´t afford. If the houses get cheap for foreigners in London, exact that will happen even more.

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This only happens if government allows it. In some places it sadly promotes it.. look at the UK, were affordable government housing has been privatized over the last 20+ years and all that has happened is that the tenants that lived there, bought their home cheaply only to sell it on to investors at a massive premium. Was the affordable housing replaced? of course not, and that caused current problems.

But the classic example of investors.. Spain. Here a foreigners drove up prices so much that the average Spaniard could not afford to buy or even rent in many areas. Spanish children live at home to their mid 30s on average.. This in turn pushed a massive investor building boom that in the end resulted in the crash we saw in 2007 or so. Now prices have fallen 20-40% depending on the areas (minus Marbella area where they have gone up.. uber rich people area), but they are still quite high for average Spaniards for buying, but renting has become some what more affordable.

Now there is a big but.. because of the terror in Turkey and North Africa, tourism has gone nuts in Spain.. 15% more this year than last year, which was a record year. This has meant that in my area, 70000+ hotel reservations have been denied due to lack of capacity and the private rental market is thriving... driving prices up. And guess what has started up again? Building.. the almost a decade long abandoned building sites are slowly coming to life again, because there is demand for rental property and for buying. Is this good or bad? Dunno to be honest. But investors are snapping up stuff here that is for sure...

PeteEU said:

Comes again down to zoning laws. It pisses me off as well, but at the same time I do understand some of them. For example height restrictions. The biggest problem in my opinion is rules that prevent using shop fronts as apartments or business addresses to be converted to homes. We got plenty of vacant business addresses, pretty much everywhere, and yet are not allowed to use them as homes.

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I´m civil engeneer - I can understand the reasons too - but it´s way too strikt, especially in the country where no one should care.
Hell if you have bad luck, they even dictate you the coulor of your house and your roofing tiles.

And Jog is right when he says that housing is that epensive because of that.

german hick said:

I´m civil engeneer - I can understand the reasons too - but it´s way too strikt, especially in the country where no one should care.
Hell if you have bad luck, they even dictate you the coulor of your house and your roofing tiles.

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Yes here they do that, but that is because it is an ancient village and tourist magnet.

And Jog is right when he says that housing is that epensive because of that.

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I disagree. He said that rules on fire hazard and CO2... aka environmental issues push costs up and here I disagree fully. If the rules were not there, then we would have un-insulated wooden shacks where families of 5 were living in one room, and STILL paying high rent. We have seen it before... historically.

What drives up prices is limiting the land allowed to build on and what type of building is allowed.

Case in point. In Copenhagen in the 1970s and 80s a zoning law was put in place to limit one and two bedroom apartments. Only 3+ room apartments were allowed to be built. Problem was that demographics changed in the 1980s and forward and people started living more and more alone and not in families. On top of that Copenhagen is a big university town, and the zoning law prevented new dormitories and student housing to be built for over a decade.. almost 2. This caused a huge pressure on housing in Copenhagen and the areas around, driving up prices. One or two bedroom apartments cost a fortune to buy and even worse to rent.. far more than most students could afford or anyone else. Even today it is a problem, even though the zoning laws were changed some what.

Now why did the Copenhagen government put these rules in place? Simple.. tax. Students dont pay much tax, but families of 3+ do. So they would rather have families living in Copenhagen, so they promoted that type of building by banning other types.

PeteEU said:

I disagree. He said that rules on fire hazard and CO2... aka environmental issues push costs up and here I disagree fully. If the rules were not there, then we would have un-insulated wooden shacks where families of 5 were living in one room, and STILL paying high rent. We have seen it before... historically.

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may be - I haven´t calculated it yet.

I see it more in a personal freedom view - not for flats to be rented but building a home for yourself.
you could do that with straw btw or other cheap material for a tenth of an alowed house here



sorry for offtopic - has nothing to do with London ;o)

german hick said:

may be - I haven´t calculated it yet.

I see it more in a personal freedom view - not for flats to be rented but building a home for yourself.
you could do that with straw btw or other cheap material for a tenth of an alowed house here

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sorry for offtopic - has nothing to do with London ;o)

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It is not off topic per say. It is part of the overall problem.

You claim "freedom", and yes there is that aspect. If you are in the middle of no where and cant harm neighbors (and it is not a protected area of course), then yes I would agree. But many of the rules we both hate, were put in place to protect people. Why? Abuse of course.

One of the top problems for police and social authorities is... neighbor problems. Everything from building something that hurts the valuation of properties to noise and so on.

And what relevance does it have with the topic? Well, one rule I suspect that many of these wealthy areas of London have, is .. no social housing or similar is allowed to be built. Why? Of course because valuations would fall (and hence taxes) and that would not please their wealthy owners.

But if we go fully back to the topic, first time buyers are screwed no matter what, but especially in London. Banks are not lending as they use too, making it harder to get a loan and even if you were able to get one, then the amount of money you would have to put in .. dunno what it is called... but you have to contribute part of the price.. say 20k pounds.. deposit? Point is, very few have that, and they cant borrow to get it.

A lower pound or higher wont change anything. Only thing that will change stuff is to ban foreign ownership without having legal residence, or.. just foreign ownership in general. Or build more affordable housing. Problem with London/UK is that they have such a big deficit in housing that even if they kicked out all foreigners (which many would love), there would still be a lack of housing!

PeteEU said:

1. Excuses except the zoning laws issue. There is plenty of room to build, both in Germany and the UK. However zoning laws often prevent single room cheap housing from being built, because local government does not want that type of tax payer in their area.



2. LOL more excuses that are lame and false. Yes lets build fire hazard half falling down housing to house all the middle class and poor. So what if they use 40% of their income on heating during the winter, their home is cheap!

One of the main problems for British pensioners is the cost of heating, because so many British homes are so ****ty insulated. You dont have that problem in Scandinavia or Germany funny enough, and yet housing is more expensive in the UK..

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1. That is all about zoning, so where is the "Excuses"?
2. I seem never to have calculated the cost of building vs the difference different solutions make on the level of rent. How much do you think the difference is between being allowed an additional two stories or increasing the level of insulation. We were talking with a large Durch investor recently. They said they were uninterested in a 30 party house unless the insulation could be reduced. The cost reduction had to be for Euros 1.50 per sqm a month on rent of Euros 10 sqm. They said the rent could not be raised enough to pay for the extra costs of building in their experience with 30.000 apartments in their portfolio. Most of that is in Holland BTW. We had a similar experience with a Swede, but the Danes are certainly different, much, much better people, I guess.
As to fire hazards, do you even know the questions involved?

german hick said:

yeah - something that pisses me really off. Even in private everything here is ruled. If I will leave this Country one time, that will be the reason. I am not alowed to build a cabin in my own Forrest!

In our big cities - and I think it´s all over Europe the same - there is another Problem, that may affect this topic, too. Investors. They buy cheap houses in Berlin, Munic, Hamburg etc - renovate them and let them for such high prices that normal citizens can´t afford. If the houses get cheap for foreigners in London, exact that will happen even more.

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Sure the investors will buy cheap and sell expensive as long as not enough housing is built to push down the price. And voilà, we are back to regulation.

joG said:

I seem never to have calculated the cost of building vs the difference different solutions make on the level of rent. How much do you think the difference is between being allowed an additional two stories or increasing the level of insulation. We were talking with a large Durch investor recently. They said they were uninterested in a 30 party house unless the insulation could be reduced. The cost reduction had to be for Euros 1.50 per sqm a month on rent of Euros 10 sqm. They said the rent could not be raised enough to pay for the extra costs of building in their experience with 30.000 apartments in their portfolio. Most of that is in Holland BTW. We had a similar experience with a Swede, but the Danes are certainly different, much, much better people, I guess.

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And if they could cut out insulation all together, then they would be much happier! It is a classic excuse. Hell lets not build with a foundation.. save a few bucks there.. lets build 12 stories with no foundation.. **** regulations. The building will hold.. maybe.

As to fire hazards, do you even know the questions involved?

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You were the one who brought up fire hazards with no explanation, so all I can do is guess that you have no problem building homes with cheap materials that can catch fire easily. Maybe for once you can start providing proof or links or evidence on your views..I and others have only been asking for years for this. So dont assume that we are mind readers when you do your posts.

PeteEU said:

1. And if they could cut out insulation all together, then they would be much happier! It is a classic excuse. Hell lets not build with a foundation.. save a few bucks there.. lets build 12 stories with no foundation.. **** regulations. The building will hold.. maybe.

2. You were the one who brought up fire hazards with no explanation, so all I can do is guess that you have no problem building homes with cheap materials that can catch fire easily. Maybe for once you can start providing proof or links or evidence on your views..I and others have only been asking for years for this. So dont assume that we are mind readers when you do your posts.

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1. It is not an excuse. What we are seeing in Germany right now is rather wide protest against the level of rents. If the reduced level, which is still pretty energy efficient costs 15 % of rent, then it is a good part of the complaint. Add another 15 % for not being allowed to add three floors to the house and Euro 20.000 for a parking space etc and you are talking rather a regulatory hit of maybe Euros 300 or Euros 350 on a 100 sqm apartment that the person on the street does not want to pay for and probably does not understand.

2. Nope. It was also a matter of materials but to a lesser degree. The main question is the hight of buildings. Higher buildings require extra equipment be held by fire departments. If the city does not do so, they must forbid higher buildings being built. That means lower supply and higher rents for all. There are a number of these effects, but I hope that you need only one example.

joG said:

1. It is not an excuse. What we are seeing in Germany right now is rather wide protest against the level of rents. If the reduced level, which is still pretty energy efficient costs 15 % of rent, then it is a good part of the complaint. Add another 15 % for not being allowed to add three floors to the house and Euro 20.000 for a parking space etc and you are talking rather a regulatory hit of maybe Euros 300 or Euros 350 on a 100 sqm apartment that the person on the street does not want to pay for and probably does not understand.

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And again it is nothing but an excuse. The EU has forced through an environmental report on homes which should give more information and expose the builders for their lies and exploration. Now it is pretty irrelevant where I live, but in the UK and Northern Europe it is not irrelevant. Savings by the consumer can be considerable, but the builders are blaming their high prices for helping the consumer, and taking "extra".. yes exploiting a high energy efficient buildings price versus the lesser around the corner. In reality there aint that much a difference, as you claim, certainly not one that shows up as 50-100 more in rent or more in selling price that is relevant to the final price. Yes a house may cost 210k instead of 200k, but the environmental report should show the savings in utilities that make up for this. A consumer can understand this, but the building industry does not want the consumer to know.

2. Nope. It was also a matter of materials but to a lesser degree. The main question is the hight of buildings. Higher buildings require extra equipment be held by fire departments. If the city does not do so, they must forbid higher buildings being built. That means lower supply and higher rents for all. There are a number of these effects, but I hope that you need only one example.

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LOL so you are blaming the fire department and government for not having to explain hundreds of deaths because of lax fire regulations? Of course higher buildings require extra equipment.. else people will die. God forbid that the doors are fire doors instead of 2.5 cm plywood that burn in 2 seconds. Is there a higher cost? Of course, but you cant seriously say that we should lax on these regulations so that more people can get into homes across countries.. homes that would be leaking like swiss cheese and be fire hazards like no other.. just so the builders can make an extra few bucks?

If anything this shows the need for a public works system where the state builds homes at cost.. and not for profit. Yes I went there, and I dont like it. But if a builder cant make a profit over a 30 year period on building 200 apartments up to minimum codes.. then frankly **** them... because they can. But it is not as profitable as building expensive homes/buildings for rich clients.

PeteEU said:

And what relevance does it have with the topic? Well, one rule I suspect that many of these wealthy areas of London have, is .. no social housing or similar is allowed to be built. Why? Of course because valuations would fall (and hence taxes) and that would not please their wealthy owners.

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It goes beyond that: some enterprises need high-level executives and they will not be able to attract them if they cannot enjoy security, and luxury facilities that consume scarce space you would rather use for social housing. London is rich precisely because there are places without social housing, otherwise your financial place would have moved to New York.

Anyway can we really mix high-level executives with poor workers? I doubt it will work well:: too much jealousy on one side and contempt on the other, and poor workers will not even be able to afford the goods at the local businesses. This rather looks like a demagogue waste of space imo. Besides the city council will probably game the system to grant the social housing to their families since the best schools and facilities will be there.

Or build more affordable housing. Problem with London/UK is that they have such a big deficit in housing that even if they kicked out all foreigners (which many would love), there would still be a lack of housing!

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From what you say, you do not need social housing, you rather need plans to prolong or densify the underdeveloped parts of London. Let promoters build, let the govt focus on infrastructures, inertia and the minimum rules. The offer will eventually meet the demand.

PeteEU said:

And again it is nothing but an excuse. The EU has forced through an environmental report on homes which should give more information and expose the builders for their lies and exploration. Now it is pretty irrelevant where I live, but in the UK and Northern Europe it is not irrelevant. Savings by the consumer can be considerable, but the builders are blaming their high prices for helping the consumer, and taking "extra".. yes exploiting a high energy efficient buildings price versus the lesser around the corner. In reality there aint that much a difference, as you claim, certainly not one that shows up as 50-100 more in rent or more in selling price that is relevant to the final price. Yes a house may cost 210k instead of 200k, but the environmental report should show the savings in utilities that make up for this. A consumer can understand this, but the building industry does not want the consumer to know.



LOL so you are blaming the fire department and government for not having to explain hundreds of deaths because of lax fire regulations? Of course higher buildings require extra equipment.. else people will die. God forbid that the doors are fire doors instead of 2.5 cm plywood that burn in 2 seconds. Is there a higher cost? Of course, but you cant seriously say that we should lax on these regulations so that more people can get into homes across countries.. homes that would be leaking like swiss cheese and be fire hazards like no other.. just so the builders can make an extra few bucks?

If anything this shows the need for a public works system where the state builds homes at cost.. and not for profit. Yes I went there, and I dont like it. But if a builder cant make a profit over a 30 year period on building 200 apartments up to minimum codes.. then frankly **** them... because they can. But it is not as profitable as building expensive homes/buildings for rich clients.

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An excuse for what?

Interesting information about the EUs housing market.

The European Cities With the Most Affordable Housing - CityLab

Look at the map of when most dwellings were constructed.. very interesting for the UK.

PeteEU said:

~ Look at the map of when most dwellings were constructed.. very interesting for the UK.

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That particular map is mostly green showing a majority of housing built between 1910 and 1970, more modern than other places. My point would be that these buildings weren't built with flooding in mind and any changes would take a while/

Strangely though, my perception round here is most houses are terraced, pre 1920 and certainly Victorian.

PeteEU said:

Build more affordable housing...

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Or social housing.

PeteEU said:

...What drives up prices is limiting the land allowed to build on and what type of building is allowed...

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What also drives prices up is the house building cartel that holds onto land and doesn't build on it because they want to keep prices artificially high for their new builds. We are being drip fed new property in order to maintain an artificially high value.