Not all investments yield the same returns
In recent years, the corporate ownership of housing in Britain has seen a significant surge, yet there's little robust monitoring of the ownership trails that lead overseas. This trend is raising concerns as foreign purchases typically target existing homes, increasing demand and prices, and making housing less affordable for people who live and work there.
One area that has been heavily foreign-owned is the UK's water industry, which has been neglected, leading to questions about its maintenance and development. The total value of foreign-owned housing by private individuals surpassed £100bn in 2024.
Average private rents in the UK have increased by 6.7% over the past 12 months, reaching an average of £1,399 per month. Rents in the north-east of the UK have seen a joint record rise of 9.7% over the same period. These increases are contributing to the overall rise in living costs, making it challenging for many people to afford housing.
However, it's important to note that not all foreign investment is negative. The UK government, led by Chancellor Rachel Reeves and Prime Minister Keir Starmer, is seeking to develop a commercially attractive pipeline of investment opportunities for a global audience. The government of Singapore, for instance, started increasing an additional buyer's stamp duty (ABSD) on foreign purchases in 2011, with the aim of improving rent affordability.
Spain has announced plans for a tax of up to 100% on property purchases by non-EU residents, a move that could potentially curb foreign ownership and help control housing prices. Australia and Canada have recently banned or extended bans on foreign purchases of existing properties, suggesting a global trend towards regulating foreign ownership.
Two-thirds (64%) of the foreign direct investment (FDI) that flowed into the UK over the past 20 years went into mergers and acquisitions, not greenfield investments. This suggests that a significant portion of foreign investment is not contributing to the creation of new businesses or jobs, but rather the consolidation of existing ones.
Academic studies suggest that this type of investment often brings little-to-no benefit and can lead to reduced innovation and greater use of tax-avoiding accounting tricks. NEF research suggests that tripling the current stamp duty surcharge to 6% for non-residents could raise £300m-£400m annually and build over 2,000 social (council) homes every year.
However, it's crucial to direct and encourage the foreign investment the UK receives to productive parts of the economy. Strong controls are needed to ensure that foreign investment benefits the UK economy, rather than driving up housing costs and making it less affordable for locals.
The search results do not contain information about which countries have caused the largest shares of total expenditures for acquisitions of existing business divisions in the UK over the past 20 years. This is an area that requires further investigation to understand the impact of foreign investment on the UK economy and to develop effective policies to regulate it.
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