Wednesday, 18 December 2013

British homes for British buyers?

Housebuilding's status as one of the highest profile political footballs became more entrenched today with the announcement by 11 leading London developers that they would no longer market developments off-plan to foreign investors (mainly Asian) before British buyers get at least an equal crack at the whip.

Under the aegis of the Home Builders Federation, builders including Barratt, Telford and Galliard followed a lead set by the capital's biggest builder, Berkeley, in signing a voluntary pledge that "all new developments will be marketed in the UK before or at least at the same time as abroad".

One can only suppose that the HBF has been at least slightly leaned on by ministers, following headlines in the summer, such as in the FT, that "Foreigners buy nearly 75% of new homes in inner London". This concluded that the trend would "fuel a boom that threatens to freeze out domestic purchasers".

The sensitivity of both politicians to these stories and of housebuilders to incursions by politicians was demonstrated yesterday with the massed howls of protest from builders at Labour's revival of claims that they were "hoarding land".

Will it have an impact on the market? Possibly at the fringes. First of all, one has to question how much impact foreign buyers have. Back in August Knight Frank research found that foreign buyers accounted for 73% of purchases in central London. Today's release from the HBF quotes a figure of 11%, but based on Greater London, it appears.

The HBF argues that pre-selling homes (at least taking deposits) often makes the difference between sites being viable or not and is at pains to dispel the "lights out London myth".

Only time will tell whether housebuilders will market their properties to Asian's less vigorously or merely add UK investors to their mailing lists for off-plan releases. It's doubtful whether they will turn down lucrative foreign customer bases, having worked hard to foster them.

The more worrying implication, following the imposition of Capital Gains Tax on foreign buyers and Labour leader Ed Miliband's sortie into the space, is that politicians are clearly breathing down the necks of housebuilders more than ever (while Bank of England Governor Mark Carney is doing likewise with mortgage lenders). But, as housebuilding history suggests (in this country and further afield), once political leaders start interfering they usually end up making things worse. 


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