| Topic: | Reply | |
| Posted by: | Gordon Southwell | |
| Date/Time: | 27/10/18 17:14:00 |
I presume by aliens you mean foreigners and not little green men from Mars. One of the reasons this measure has had to be introduced is the collapse of projects being started by the private sector. There are a few reasons that this has happened such as Brexit uncertainty and stamp duty changes but a related factor is the collapse of overseas demand for UK residential property. The property market was already dysfunctional because of the ridiculous over tightening of mortgage regulation which meant that very few people, particularly first time buyers, were able to get on the property ladder. This issue was partly solved by overseas buying but most of this didn't come from shady Russian billionaires or Saudi princes but from middle class Asians from places like Singapore, Malaysia and Hong Kong. With no significant state pension system or welfare support they have much higher savings rates than we do and UK property offered an attractive yield often sweetened by any units being bought being available for children studying in the UK. This is really just part of the international flow of capital and it should be remembered that we through our pension system are buying significant shares in companies listed in these countries. Demand from this source disappeared when the weakness of sterling meant that the perception of currency risk was too high. What this meant was that developers' were reluctant to start new projects because the ones they currently were trying to sell weren't moving. Hence the reason that the government has been forced to provide a billion pounds in London alone to get things moving again. The only way to effectively stop prices continually rising is to create more supply than demand and the disappearance of Asian buyers from the market has resulted in a crunch in supply. So, if your ill-considered policy of stopping 'aliens' buying property was ever introduced it would mean fewer homes would be built and prices would rise. This is to discount totally the UK's dependence of free movement of capital for City based industries which provide such a large proportion of government revenue. Capital controls of this nature would have a massively negative impact on this sector. |