A new register of overseas entities maintained by Companies House came into force yesterdaymeaning that buyers will be forced to declare their ownership of properties and provide details of their beneficial owners. It is being described by experts as being ‘riddled with flaws and loopholes’, though the government has stated the register intends to ‘flush out corrupt elites laundering money through UK property’. The legislation also includes a fine of up to £2,500 a day for failing to comply with the rules. It will be publicly available at Companies House, but it is unclear how significant this new regulation could be and whether it will deter foreign investment in the UK property market.
The UK property market continues its upward trajectory as recent data from Halifax shows that the average house price now stands at £294,845, which represents a 6.8% rise, or £18,849 since the start of the year. This means that house prices have risen every month over the last year as the supply-demand imbalance continues to be the main contributor to this. With inflation in the UK rising to 9.4% in the year to June – marking its highest rate in 40 years, many are expecting a sharp decline in the property market, but the influx of foreign investment for properties in the UK could continue to push house prices higher. Recent research from Benham and Reeves shows that overseas nationals now own almost 250,000 homes across England and Wales – amounting to £90.7 billion worth of property.
London continues to be home to the highest value of foreign-owned homes, with all of the city’s top five property deals in 2021 – worth £20 million or more – involving Chinese billionaires,according to Beauchamp. Following sanctions imposed on Russian investors there were fears that foreign investment would falter, however Chinese investors seem to have picked up the slack. There are now 85,451 properties (amounting to a total value of £45.3 billion) in the capital owned by oversea investors who are able to take advantage of the UK’s thriving market.
The drop in the value of the pound, which has fallen by 11% since the start of the year, seems to be one of the major appealing aspects of buying property in the UK. 61 luxury properties in London – each worth more than £10 million, have been sold in the first six months of 2022 – representing the highest number in a decade.
David Hannah, Group Chairman at Cornerstone Tax, discusses the impact of foreign investors in the UK property market:
“What people must consider is that the UK property market is an international market, meaning it can be affected by geo-political events all over the world. Even if domestic demand cools, I think international demand will increase and the UK market will be affected because of it. I don’t think foreign investment will be overly deterred by the new rules which came into place yesterday with many being concerned that a number of loopholes exist in these plans.
“Property in the UK represents an exciting opportunity for foreign buyers because of the drop in the value of the pound. UK house prices continue to rise at a staggering rate domestically, being pushed higher by factors such as the influx of oversea investors. In the past, factors such as the stamp duty holiday have caused more people to consider buying property. However, due to the increase in average house prices, it has made it more difficult than ever for buyers to purchase their first property.
“There is hope that more available properties will enter the UK housing market and the latest House Price Index shows an increase of 24% in the number of prospective sellers bringing homes to the market – thus causing a more manageable supply and demand level and potentially slowing the rapid rise of property prices.”
