The recent Civitas paper published earlier this weekmakes for interesting reading. In its report it argues the UK property market is being used as an investment arm of the global super-rich and calls for curbs on foreign property investors.
It argues that hundreds of thousands of younger residents are being priced out of the market and rents are eating into more and more of people's salaries.
There is a strong coherent argument made in the report, but outlawing foreign buyers would be a damaging shift. It is also not clear whether a ban would include UK expats living abroad and holding buy-to-lets? Would it include those renting property in the UK while living abroad?
We would be very concerned about the impact on expat mortgages which are a valuable tool for those who live abroad but want to retain links with the UK.
The concern is to bring down house prices and it is true that billions of pound worth of global money has flooded into the capital.
Millionaire Frenchmen, billionaire Russians and even trillionaire Arabs have focused on the capital as an investment hotspot.
London property has proven reliable during an era of global investment turbulence whether it be the Uk legal system or stable political system.
From the Arab Spring to Vladmir Putin’s Russia, foreigners look to London’s open markets with envy and want a piece of the action.
Estate agencies report that the majority of central London property purchases, in both the 'prime' and new-build categories, are made with international money.
Estimates suggest in the region of £5bn of overseas cash will be spent on new-build London homes in 2014.
As well as driving up prices, there are claims that investment at the top end of the market has been distracting developers from the need for more affordable accommodation.
This is the backdrop for Civitas’ call but it is the wrong prescription. Worryingly, there are signs the Government buys into some of these arguments.
In last year’s autumn statement it slapped Capital Gains Tax on foreign buyers of residential property for the first time.
The tax rise only raises around £100m a year but the symbolism could be more costly.
Foreign buyer crackdown
Civitas wants to go much further, claiming the fundamentals are not changed by higher CGT.
It says non-residents of the UK should only be allowed to purchase a property here if that investment will add to the number of homes.
The idea reflects the system in place in Australia, where all non-residents wishing to purchase property must apply to that country's Foreign Investment Review Board.
They are not allowed to buy an existing home but they may be allowed to buy an unoccupied new dwelling, so long as they can satisfy the FIRB that the housing stock has increased.
Civitas proposes setting up a 'non-resident housing investment agency' for the UK to which non-residents would need to apply for permission to buy.
The job of the proposed agency would be to ensure that all overseas investments are in the public interest in this way.
The public interest is a fluid concept and could change over time depending on the public mood and whims of politicians.
Many foreign buyers makes cash purchase but ultimately the UK mortgage market could take a hit by denying access to foreign buyers.
Any UK expat should keep abreast of the latest developments and take professional advice if necessary.
This type of protectionism is a blunt tool and could hit UK citizens as well as foreign investors and immigrants.