David Cameron’s announcement today that the Land Registry will publish information on the UK property holdings of foreign companies is welcome: although it is understandably and rightly being presented as a move to tackle corruption, it has positive implications for our dysfunctional property market.
The examples shown in today’s media coverage reinforce what we’ve known for sometime, that homes in this country are increasingly been treated by some as instruments of unproductive financial speculation rather than places to live.
Some sunlight is definitely needed here. We simply don’t know how much foreign money has flowed into the UK’s inflated property market over the years, nor exactly what the impact on prices and the buying chances of ordinary families is, let alone how much of it comes from criminal sources. But we can safely say that in general the impact on the property market is the same wherever such money comes from: house prices are pushed up (reaching a new record high today), contributing to the pricing out of whole generations from the dream of a home of their own.
Releasing this information will hopeful reveal how much of a problem international criminals seeking to launder ill-gotten fortunes via London property market really is. The suggestion is that they are acting as parasites on the UK economy – in which case it is absolutely right to clamp down on them. But the problem of financial speculation making homes unaffordable runs deeper and wider than London’s luxury sector. The home-grown Buy to Let boom was identified as adding up to 7% to house prices in 2007 – and that was before the financial crisis and sensible new regulations were brought in but not extended to BTL, which has given investors even more of a market advantage over first time buyers.
Investor demand for new flats bought off-plan – much of it from overseas – is now so central to the business model of much inner city development that the industry is becoming geared towards serving this demand, rather than the needs of local families. Finally, house prices everywhere are pushed up by expectations of future price growth, as ordinary buyers scramble to get on the ladder before prices escape them forever.
Let’s hope that the government’s move towards greater transparency in the property market is just the first step. For example, we’ve called for information on land options to be published too. These private contracts enable developers to control a future pipeline of potential development sites – but they are largely hidden from public scrutiny, making it impossible for planning authorities and local communities to know who really controls land in their area. And the scandal of secret viability assessments being used to drive down affordable housing contributions is finally getting the attention it deserves.
Bringing some transparency to the murkier aspects of the property investment industry has to be a positive step forward. Hopefully it will just be the start of more comprehensive moves to make the land and property markets properly transparent. Doing so will not solve our housing problems over night – but it will help tackle some the worst excesses, and make real solutions more achievable.