“The government believes there is evidence that allowing foreign buyers to snap up homes while paying the same duty as British residents “is inflating house prices”. …”
Well, who would have guessed!
What is needed is to deal with corruption. This is fuelling the doughnut effect, forcing residents to buy further and further out because of the effect corruption has on London property prices…
Just read the following:
Macavity, here is my alternative take on the whole property price rise issue – that whilst corruption does contribute, it is not the primary cause or issue.
1. Fundamentally housing prices are down to the economic law of supply and demand. When demand exceeds supply, prices will rise. Foreign property investors – esp. those based on ill-gotten gains – add to the demand side and makes things worse, as does a concentration of employment in London – but equally important is a shortage of supply.
2. When demand exceeds supply, prices rise to the level that people can afford. When mortgage interest rates are unbelievably low, that means people can afford to pay more for their house, and so prices rise to match. (Which is why government subsidies such as Help To Buy don’t work.)
3. However, housing price rises have not been helped by huge inflation at the bottom of the ladder creating a ripple effect all the way up the ladder to the top. By this I mean…
a. Until the early 1980s, rental prices at the bottom of the ladder were fairly fixed – by which I mean social housing rents were extremely stable and also very low. These had a stabilising effect on the whole property market – if council house rents were low, that meant that private rents could not be too much higher, and that discouraged buy-to-let (reduced demand). Similarly lower private rents meant that people wouldn’t pay too much more to own a house.
b. When Maggie Thatcher introduced Right To Buy, it destabilised the property market by unanchoring it.
4. When the biggest developers managed to corner the market on housing land supply, they effectively closed the housing market to new entrants and created a clique-opoly. Whilst they may not openly create a cartel, that is what has happened in practice (and the evidence is there for everyone to see in their unfair business practices which clearly demonstrate they are in a dominant position c.f. buyers). By cornering the market on land supply, the level of new builds is not controlled by demand, but rather it is decided by whatever approach maximises the profits of the big developers who control it – and that means deliberately restricting supply to keep prices high.
5. All of the above is not helped by the Government outsourcing the development of Housing Policy to the developers – like asking poachers to define the gamekeeping laws. The developers then defined policy to make it easy for them to gain planning permission and book their profits without actually building houses. When you can book profits without building, and at the same time restrict building to keep the prices of what you do build high, then you truly CAN have your cake AND eat it.