Legal News

As many as one-tenth of new homes built in London are now offered to buyers overseas before UK house hunters.

Well known house building companies such as Barratt have admitted marketing new homes abroad – but the practice may now end, however, after eight leading property developers in the UK agreed to market new homes fairly, allowing British house hunters the chance to snap up a new-build home.

Overseas investment in the UK property market is thought to be one of the reasons for a shortage of housing stock to buy – and many families with dependant children now have to rent their home rather than buy, pushing up rents in the private sector.

House builders have admitted they have been marketing new builds to wealthy buyers in China, Russia and Malaysia – leaving UK buyers out in the cold. London is especially popular with overseas property investors, many of whom use homes they buy in the capital as buy-to-let investments, charging premium rents.

Leading house builders Barratt Developments, Galliard Homes and Crest Nicholson have signed up to a voluntary commitment drawn up by the Home Builders’ Federation (HBF) “to ensure UK buyers have every opportunity to buy new-build homes in the capital”.

A survey carried out by the federation has found that last year almost half (49%) of new builds in the capital were sold to overseas buyers, with many developers offering new build homes off plan to overseas buyers up to 21 months in advance.

A total of 11% of new homes built in the London area were bought by overseas property investors – domestic buyers are usually only given a mortgage offer by a lender months in advance of buying a home, meaning overseas buyers and domestic buyers with cash have an advantage.

In the Autumn Statement, Chancellor George Osborne introduced capital gains tax for overseas property investors who sell their UK homes.

Property developers have asked that no further measures be introduced, in case overseas investors are deterred from buying homes in Britain – something which developers say has helped the property sector weather the credit crunch.

The government introduced a two-phase Help to Buy scheme this year to encourage and support existing home owners wishing to buy a bigger home, as well as first-time buyers wishing to get on the property ladder

Critics of the scheme say that it may also add fuel to escalating house prices in the UK – resulting in a property bubble.

Banks and other lenders are asking the government to set an end date for the Help to Buy scheme, in which the government underwrites part of a loan and lenders have to offer low deposits from 5% of the asking price.

After the banking crisis and credit crunch of 2008 and beyond, the housing market stalled and some banks and building societies withdrew mortgage products, leaving first-time buyers unable to secure a loan and homeowners with existing properties stuck in homes which the may have outgrown, but were forced to remain living in.

The government has made available funds which lenders can borrow at a favourable rate of interest, enabling them to recommence offering mortgages to homebuyers.

Chief executive of the HBF Stewart Baseley said, however, that selling off plan to wealthy overseas investors helped developers fund new projects for domestic home buyers, including thousands of new builds in London:

“Attracting up-front investment by pre-selling homes is absolutely key – and without it, many developments would not go ahead,” he said.
The eight developers signing the HBF agreement build 44% of London’s new homes.

Duncan Lewis Housing Solicitors

Duncan Lewis housing solicitors can advise on a wide range of landlord and tenant or housing issues, including mortgage repossession, landlord’s possession and Local Authority housing.

Duncan Lewis can also advise on disrepair in private or public sector rental properties, as well as unlawful eviction.

For expert advice on housing and landlord and tenant law, contact Duncan Lewis housing solicitors on 020 7923 4020.