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Right-wing thinktank in UK proposes dramatic new restrictions to keep foreign buyers out of housing market

February 1st, 2014 · 126 Comments

 

This sent on to me by one of my most loyal researchers, who makes sure I know always what’s happening in the rest of the world.

http://www.theguardian.com/business/2014/feb/01/rich-overseas-investors-uk-eu-housing-market

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Radical plans to stop rich overseas residents who live outside the EU buying British houses – as well as tight restrictions on them acquiring “newbuild” properties as investments – will be published in a report by a leading rightwing thinktank on Monday.

Free-market organisation Civitas castigates government ministers for allowing wealthy foreign investors to stoke a property boom that it says is driving up prices and locking millions of UK citizens out of the housing market.

The plans would prevent the likes of Roman Abramovich, owner of Chelsea football club, or other Russian oligarchs from adding to their multimillion-pound UK portfolios. They also aim to stem a flood of investment from countries such as China, Malaysia and Singapore.

Concerned that many middle and lower earners are being forced to pay high rents in London because they can’t afford to buy, Civitas calls on ministers to adopt a scheme similar to one operating in Australia, which ensures that no sale can take place to overseas buyers unless they can show that their investment will add to existing housing stock.

Such a system would mean that no existing home could be sold to a buyer from outside the EU, and that such buyers could acquire newbuild homes only if their investment led to one or more additional properties being built.

The report, called Finding Shelter, cites statistics showing that 85% of prime London property purchases in 2012 were made with overseas money. Estate agent Savills found that last year £7bn of international money was spent on “high-end” London homes, with just 20% of that spent by UK citizens. Two-thirds of homes bought by people from overseas were not purchased for owner-occupation but as investments.

Civitas says the problem is not confined to the top end of the market and that overseas buyers are also acquiring less expensive newbuild homes. It says that over the past two years only 27% of new homes in central London went to UK buyers, while more than half were sold to residents of Singapore, Hong Kong, China, Malaysia and Russia.

“The UK property market is being used as an investment vehicle by the global super-rich – and increasingly the simply well-to-do,” the report says. “The inflationary impact of this extra cash is good news for property owners – until they want to trade up the housing ladder.

“It is good news for estate agents on commission, who report with glee every pulse and surge in the market. But it is not good for those already being priced out at the bottom.”

Overseas investment, it adds, is also “distorting housebuilding priorities, with developers disproportionately attracted to high-value developments while ignoring the undersupply at lower levels of the market.”

Oligarchs including Abramovich and former Yukos Oil vice-president Konstantin Kagalovsky have bought London properties, with Belgravia, Knightsbridge, Kensington and Chelsea their favourite hunting grounds.

Under Australia’s scheme, all foreign non-residents and holders of short-term visas have to apply to the Foreign Investment Review Board if they want to buy property. Its rules state that they can do so only if their investment leads to an increase in available dwellings.

Civitas says that if a similar scheme were adopted here, people from outside the EU would be able buy a newbuild property only if they had invested in a building scheme.

In last year’s autumn statement the chancellor, George Osborne, announced that he was closing a loophole that had allowed foreign investors to make huge profits on sales of UK homes by avoiding any capital gains tax. Civitas says that move, while a step forward, is unlikely to deter them, because the booming British market remains so attractive.

Labour recently announced a series of measures to boost housebuilding and deter foreign investment in London, including changing the rules so that newbuild homes have to be marketed to Londoners first, rather than sold off-plan to investors around the world. It also plans to double council tax for homes left empty and will end another loophole that allows overseas owners to cut their tax bills by claiming their properties are “second homes” and furnishing them with minimal items such a single table and chair.

Sadiq Khan, the shadow London minister, said: “London is in the middle of a severe housing crisis, yet there are around 50,000 empty homes across the city. It’s complete madness. We must stop housing that’s built as family homes being used instead as a piggy bank for the world’s wealthiest people.

“We urgently need to build more affordable housing in London, but unless all new homes are made available for Londoners to buy, they won’t help solve the crisis.”

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  • Bill

    @jenables #98

    If you believe that not buying from Lululemon will result in a better life for those making the clothes letting you sleep with a clear conscience then go for it.

  • brilliant

    @Waltsyss 86-“I mean have you been to Tim Hortons lately” LOL and you say I’m racist yet you recoil at the thought of Filipinos fondling your timbits? You certain won’t catch all the Winnies and Winstons deigning to work, they’re to busy driving their Maseratis to Holt Renfrew

  • Bill

    @waltyss #98

    “Unfortunately, it is the diminishing concentration of trade unions that is a significant factor in the hollowing out of the middle class and wage stagnation.”

    And why do you think there are fewer unions in the private sector?

    “And your claim that improvements in the standard of living will continue to rise is laughable.”

    Tell that to the people of Japan, South Korea, Taiwan just to name a few which started out producing low cost consumer goods based on a labour cost advantage and progressed up the value chain to higher value added quality products. The lower value added jobs went to other countries that had a labour cost advantage.

    As for your story from the NY Times, I hope President Obama’s economic calculations are better than the ones he used to justify Obamacare. – http://www.reuters.com/article/2014/02/04/us-usa-fiscal-obamacare-idUSBREA131B120140204 . These numbers are from the CBO which is non-partisan.

  • Waltyss

    Brilliant not, @ 102, I don’t know whether you deliberately distort or are simply too dumb to understand.
    I have no issue with Filipinas handling my coffee or doughnuts. A Filipina helped look after my children and cooked our meals from when they were born to when the kids were teenagers. (I will wait for the inevitable insults).
    My issue is that these companies (like Tim Hortons or Macdonalds) complain that they cannot workers except that as good capitalists, they will not employ the capitalist solution: pay more in wages. They then whine to the Harper Conservatives and bingo, temporary foreign workers come over. Wages are depressed so, Bill and your ilk can drink cheap coffee, and Hortons and Macdonalds can make bigger profits.
    As for you, well, your comments about the Chinese using insulting terms establish your racist credentials

  • rph

    It is a travesty that companies like Tim Hortons continue to bring in foreign temp workers instead of hiring from the local labour pool.

    They are displacing students, those starting their work careers, new immigrants, and those for whom a service industry job best suits their needs or abilities.

    I can understand the rationale in remote locations where there is not a pool of labour willing to work for minimum wage, but this does not exist in urban areas. It is a lie perpetuated by big business that Vancouver has a shortage of service/hospitality industry employees.

    My local independant coffee shops and retail stores seem to have no problem finding staff at minimum wage. They employ my children, their friends, my neighbours, and the senior/empty nester supplementing incomes or looking for something to do a couple of days a week.

    But Tim Hortons has to bring in FTWs?

    What a joke.

  • F.H.Leghorn

    I’m confused again. It’s bad for Tim Horton’s to hire low-wage foreign workers but it’s OK for waltedious? Could he not have hired a Canadian to look after his children and cook his meals?

  • Bill

    @FHL #106

    It’s actually not that complicated. It’s not exploitation if done by a Progressive.

  • Bill

    And jenables, if you are feeling confused by waltyss’ latest revelation then I recommend reading George Will’s column from the Washington Post.
    http://www.washingtonpost.com/opinions/george-will-president-obamas-magic-words-and-numbers/2014/02/07/220fbc04-8f76-11e3-84e1-27626c5ef5fb_story.html

    It is from the US but is relevant here as we have our own Obama-Light in Justin Trudeau and the even Lighter Mayor Robertson. You may want to reconsider whether throwing your lot in with Westside Socialists like waltyss will get us where you think we need to go.

  • brilliant

    @FHL that ‘s our waltsyss emblematic of champagne socialists every where. Foe of foreign workers, friend of foreign domestics. I’m sure when pressee he’ll proclaim some of his best friends are Filipino nannies.

  • Kenji

    Not to fight walt’s battles, cuz he does that himself, but Tim Horton’s and nannies ain’t the same thing. Timmy Ho’s is a minimum wage, fast food service job and there’s plenty that compare to it. Nannying is way different – it’s child care, home care, the hours and responsibilities are high, and unlike serving donuts, there’s an entire immigration program devoted to it.

  • rph

    Very interesting article in the Vancouver Sun today that there are 45,000 wealthy Chinese on a waiting list to get into BC on the immigrant investor program. And…what will that do to Vancouver’s already high housing prices.

    http://blogs.vancouversun.com/2014/02/10/is-vancouver-ready-for-influx-of-up-to-45000-wealthy-chinese/

    Beg borrow or steal to buy a sf detached home now folks, as the sky will be the limit on future pricing.

  • waltyss

    Well, as predicted the usual suspects have tossed out their usual vitriol. If you believe that large companies should not be able to import temporary foreign workers just because they can’t find enough Canadians to work at minimum wage, well, you are a socialist. If you live in the West Side, you are a west side socialist.
    Based on that “”logic” Bill and the particularly execrable brilliant not are fascists who fully support exploiting temporary foreign workers so that large corporations can pay minimum wage and make even larger profits, wages can be suppressed and they can enjoy their cheap coffee. Having guzzled the noxious Kool Aid of the far right, they believe that unfettered capitalism is the answer to all.
    One can beg to differ without being a socialist but apparently not in the desiccated world of bilious old white guys who believe in their own God given sense of superiority.
    George Will, when he is not exploring word origins is a charter member of this club.
    As Kenji has noted, there is a vast difference between the temporary foreign workers and bringing in nannies. First, we did have to advertise to see if there are Canadians prepared to take on the job at just about any price. The marketplace (you know the one that you worship) in any event establishes a certain upper limit because at some point it is more economical to send kids to daycare.
    We paid sour nanny ignificantly above minimum wage. While someone like you two who worship money, I was not prepared to entrust the care of my chidden to people to whom I was paying minimal dollars.
    Most importantly, unlike temporary foreign workers, nannies are typically brought in under a programme where after two years they are able to apply for landed immigrant status and take any job anywhere. (Ours stayed with us for 14 years). Temporary foreign workers are here for up to two years at minimum wage and then they are returned to the Phillipines. Our former nanny is now a Canadian citizen and a Licensed Practical Nurse who works in a unionized environment and makes a living wage.
    I guess being “champagne socialists” we didn’t grind her down enough. .

  • brilliant

    @waltsyss-if she had to work for you for 14 years who can blame her for being a sour nanny!

  • Bill

    @waltyss

    It is not surprising you have a rationalization for employment of a nanny from outside of Canada. You were able to rationalize deducting for income tax expenses that were really personal entertainment (“I suspect I have been to more restaurants, hockey games and concerts on the taxpayers dime than you. However, I recognize it for what it is.”) I guess that makes you a better person than all those people who do the same thing without thinking. While not on the same scale as Al Gore, who tells us to reduce our carbon footprint while at the same time making a Sasquatch sized one himself, it is definitely of the same class of hypocrisy.

    With the nanny example who have really out done yourself in your ability to twist logic into a pretzel. You state:

    “The marketplace (you know the one that you worship) in any event establishes a certain upper limit because at some point it is more economical to send kids to daycare.”

    So it is not that you could not find a nanny in Canada but not one who would accept a wage that you were willing to pay so you applied to bring in a nanny from outside Canada who would. And you distinguish this from some of the identified abuses of the Temporary Immigrant Program?

    That’s great that your nanny is now “a Licensed Practical Nurse” but isn’t having to work for you as a nanny for 14 years a bit excessive to train as an LPN? Or perhaps she is just paying her dues for having the opportunity to come to Canada thanks to your munificence. But if they stay in their home country and work for a foreign company and are improving their standard of living but at less than what you consider to be a fair wage, then they are not paying their dues but are being exploited.

  • rph

    The gravitation of one ethnicity to a certain job (like Filipinas to the nanny/caregiver industry) has everything to do with the fact that due to poor financial circumstances in their home country, they are willing to work long hours, for minimal pay, and keep their mouths closed about working conditions.

    In fact, tying their servitude to eventual legal residency/citizenship ensures that complaints are never raised.

    Waltyss may have indeed paid his nanny more than minimum wage, and not required her labour for more than 40 hours a week, but that is an exception to the rule. If decent wages and working conditions were the norm, then there would be no difficulties filling these jobs with our local labour pool, including our own immigrants.

  • waltyss

    Bill, I guess your lips get sore reading what I write and you are driven to goofy posts as a result.
    I have used and deducted hockey tickets on the same basis as anyone else does. It is a legal expense and I have utilized it. I believe it is an unjustifiable expense but so long as it is allowed, I will use it. Hardly hypocrisy.
    Our nanny did not “have” to work for us for 14 years. She chose to. She was “indentured” for 2 years where she had to be live-in. Subsequently she continued as a live out nanny but was free to change jobs and employers at any time, just the same as any Canadian. While working for us , she trained as an LPN and now works as one.
    Contrast this to temporary foreign workers who have zero chance of becoming landed and
    Your comment about my being opposed to people staying in their home country and working for a foreign company is nonsensical. I have no issue with their doing that. My issue is more with safety standards and working conditions where the record of people being killed because of lax enforcement of safety standards. The Walmarts of the world can claim that its not them because of the chain of subcontracts who make the connection more remote. In fact, my preference would be that the Walmarts hired these people directly where standards could be enforced and where the money skimmed by subcontractors could go to the worker instead.

  • Bill

    @waltyss

    “It is a legal expense and I have utilized it.”

    Strictly speaking, only expenses incurred to produce business income are deductible for income tax purposes so you are relying on the fact that CRA is unlikely to review this expense. No different than having your employees paint your house – the expense is legal but not deductible but could be treated as an employee benefit. You want to stop those who use entertainment for business purposes as intended to prevent people like you from abusing the expense. But you’re right, dishonesty would describe your behaviour, not hypocrisy.

    “Contrast this to temporary foreign workers who have zero chance of becoming landed and”

    return home with a lot more money than they would have if they hadn’t come to Canada. Just like your nanny if she had decided to return home instead of stay in Canada.

    “She was “indentured” for 2 years where she had to be live-in.”

    Any way you slice it you exploited the fact that your nanny couldn’t earn as much in her home country and it was less than you would have to pay a resident Canadian. You took a job away from that Canadian.

    “Your comment about my being opposed to people staying in their home country and working for a foreign company is nonsensical. I have no issue with their doing that. My issue is more with safety standards and working conditions where the record of people being killed because of lax enforcement of safety standards.”

    Let me see if I have this right. It is ok to close a plant here and outsource the work to another country as long as there is sufficient safety standards in that country. It is not ok to bring those same workers to do exactly the same work here where they would be subject to our safety and employment standards. You will have to explain to the Canadian workers who have been displaced in either case why one is better than the other.

  • waltyss

    Bill whatever.
    I did no differently from anyone else in attending hockey games with business related people. But frankly, Bill, that you think I am a hypocrite or even dishonest only confirms for me that I must be doing something right. I guess having drunk the Ayn Rand Kool Aid you have a mythical view of the real world.
    As for the nanny thing, if I could have found a Canadian nanny, i would have hired her. Even young Canadians will go to Europe and work as au pairs but are not interested in it here. As I said, we advertised.
    Who said anything about closing plants here. The horse has long left that barn. Canada’s garment industry with a few exceptions in Montreal is long dead. On the other hand, would I purchase anything from Caterpillar, for example? No.
    And yes, there is a qualitative difference between outsourcing and bringing foreigners into this country to displace our workers. You, of course, being of the extreme (should I say fascist( right) would be in favour of either: ship abroad or bring them here to work cheap. After all, anything to destroy unions and hell, why shouldn’t Canadian workers have to compete with foreigners so long as they can keep wages down and therefore contribute to the corporate bottom line.

  • rf

    Waltyss….I think that your view on the reality of most tax payers is skewed by the tax deferral and benefits that high priced law partners can get through Personal Law Corps.

    Not many professions (Dr’s, Realtors) get to exploit that.

  • Bill

    @waltyss #118

    “On the other hand, would I purchase anything from Caterpillar, for example? No.”

    I wouldn’t purchase anything from Caterpillar either because I don’t need anything that they are selling. Do you?

    “And yes, there is a qualitative difference between outsourcing and bringing foreigners into this country to displace our workers.”

    I guess you feel that this qualitative difference is so self-evident it is not necessary to state exactly what it is.

    “why shouldn’t Canadian workers have to compete with foreigners”

    In a global economy Canadian workers are already competing with foreigners wherever they are working.

  • Morven

    Let us cast our thoughts back to the start of this thread (casting polemics aside).

    Minister Flaherty today cancelled the immigrant investor visa programme that had, allegedly, 44,000 wealthy Chinese awaiting their journey to Vancouver.

    Either professional advisers (and some home owners) in Vancouver will be a bit uneasy, or some other pragmatic and speedy alternative will arise out of the ashes.

    So what happens to house prices?
    -30-

  • F.H.Leghorn

    Cancelling the immigrant investor program is just a shake-down. If sufficient funds are donated to the right MPs before the coming election a similar scheme will arise shortly thereafter.

  • rph

    I think Quebec will continue to ramp up it’s immigrant investor program which is popular with investors turning over their money to la belle province, and then settling (or at least purchasing) in Ontario or BC.

    I still predict nothing but a rising price tide for sf detached in Vancouver.

  • jenables

    Calling Kirk.. I messaged frances, she wants to do the following Friday night as she is busy on the 20th. With some agreement perhapsshe will put up a post and we can have this argument IN PERSON!yesss!

  • Kirk

    @124 jenables

    Sounds good to me. Would that be Feb 21st?

  • jenables

    I think it would be the 28th