Mark Field (Cities of London and Westminster) (Con): I congratulate my hon. Friend the Member for Croydon South (Chris Philp). I did not wish to be unkind to him earlier; the point I was trying to make was that housing in London is a toxic, complicated issue. In many ways, it is one issue on which all of us, as London Members of Parliament, need to try to work together, although there will, of course, be party political differences from time to time.
I hope colleagues will forgive me for focusing my comments not on social housing, which is close to my heart—it is an issue even in my constituency—but on foreign ownership. Property ownership in Britain is a key component of the social capital that enables a free enterprise system to have popular legitimacy and to function effectively.
Foreign investment in London property is so desirable because property here is widely considered to be relatively low risk, while offering high returns. There are a great many reasons for that, mainly stemming from the inclusive and welcoming society created by this nation—our forefathers—over many generations. All this so-called social capital cannot simply be bought; it has evolved over many centuries.
As the international enclave expands in central London boroughs, prices have also been driven up in the outer suburbs. It is getting tough for even the highest paid professionals to buy homes, as population growth exacerbates supply issues. High rent gobbles up funds for deposits, and prices get a boost from artificially low interest rates. There is something very wrong, here in the capital, when hard-working residents, our own constituents, who play by the rules, are completely priced out of their own housing market. These are the sort of people who will maintain and build London’s social capital and pass it on to the next generation. Property developers benefit from that social capital and it is only right that they play their part in preserving it.
Lest we forget, the fundamental purpose of residential property is to house people. It is a precious resource and should not routinely be locked away as part of an investment portfolio. Housing is a key component of every city’s eco-system and it may now be time to consider having residential developments that are open for purchase by only UK citizens and permanent residents. That would to some extent prevent non-resident overseas investors from bringing about what is, despite the honeyed words of Knight Frank and Savills, massive distortion of London’s property market.
Nations such as Switzerland and Singapore have strict restrictions on the foreign ownership of property. Yet they are global players that still operate successfully as financial centres. In Switzerland, only Swiss citizens and permanent residents can own property. The property market is a free market that operates within those rules. In Singapore most Singaporeans live in Housing Development Board properties, which only Singaporeans can own, some of which are by any standards luxurious. Singapore also has unrestricted ownership of non HBD properties—mainly high-cost luxury properties, which are open to foreign ownership. However, high stamp duty and penal capital gains taxes are levied on speculative purchases, if the property is sold within four years of securing ownership. I fully appreciate that for London to remain a dynamic, global city we must continue to welcome people from abroad to live, work, study and build businesses here. They will make an important contribution to our city’s culture. However, that is different from welcoming speculative capital that forces British citizens and other permanent residents who live and work here out of our city.
Another key aspect to examine is the reported reluctance of banks to lend money for residential property developments, so that developers look for off-plan purchasers, frequently in Asia, to deposit 20% of the value of their purchase to allow building to commence. That is an extremely complex issue and I fully acknowledge that, for example, Battersea power station would have remained derelict had it not been for the substantial boost afforded by some of that foreign investment.
Mr Lammy: Does the right hon. Gentleman agree that another element of that foreign ownership is dirty money being trafficked through London from Russia and other places, with 3.7 square miles of London owned by offshore companies—we do not know whom—and that we need serious regulation?
Mark Field: There are two issues. There is clearly some dirty money; it would be naive to suggest there is none. That said, there is also significant investment from Russia and the middle east that is not dirty money at all. As for offshore companies, we should not necessarily assume that there is a direct connection there. There is a range of reasons for using offshore financial vehicles in an entirely legitimate way. The important thing is to have a registration process—although it need not necessarily be open, because that would lead to all sorts of other difficulties—so that the authorities in the Channel Islands or Cayman Islands, for example, are well aware of what is going on.
I appreciate that others want to speak but want briefly, if I may, to suggest some qualifications that we might have in mind as criteria for purchasing into the London market. An individual should be either a British citizen or permanent resident, and the purchase should not be for a buy-to-let investment, but a home to live in.
It should be possible to let the property out only after period of residency, and then only for a specified time before it would need to be sold. If the property were immediately sold, a penal capital gain would be levied, and it would have to be sold to people who qualified under the same criteria. Additional levies on speculative ownership and buy-to-leave-empty purchases might also need to be considered alongside a potential system for a higher non-resident council tax, which I have also discussed in the past.
I am trying here to provoke some thoughtful debate, and I recognise that some of my proposals will not necessarily prove entirely practicable. However, we should not lose sight of the foundations on which the high property prices in London are built. They have much to do with the huge amounts of social capital created by our constituents over many centuries. We are custodians of that social capital, and our duty is to grow it, improve it and bequeath it properly to future generations.