UK housing

Britain has continually faced a housing shortage crisis but experts warn that foreign investors are exacerbating the situation due to them snapping up homes that are designed for first time buyers and families on lower incomes.

According to a report by the Daily Mail, which compiled statistics from a number of estate agents around the world, Chinese and Russian investors are snapping up some of Britain's properties that are on the lower end of the price range, as they are aimed at those looking to get on the housing ladder or for families from the lower wage bracket.

The report cited data from estate agent network, London Property Partners, which said just 15% of property sales in London until June 2013 were made of UK buyers.

Furthermore, according to estate agents Savills, a number of homes bought with cash rose by about 20% over the past year.

Meanwhile, abroad, foreign estate agents are apparently enticing wealthy investors to snap up properties outside the capital and buy cheaper units across the home counties and Northern England, to made a sizeable return by selling on the house later.

Russia's All European Estate advertises 2,368 UK houses and flats on its website while the country's Angliadom property firm advises investors to snap up units in Swindon and a range of other cities outside London.

Elsewhere, China's international property-search portal Juwai estimates 63 million Chinese people are wealthy enough to afford a property overseas.

"The money from these buyers should be invested in businesses or the manufacturing industry not in family homes," said Paula Higgins, of consumer group the HomeOwners Alliance, to the Daily Mail.

"This pushes up prices out of reach of families. How are first-time buyers supposed to... compete with a foreign investor who can pay for a home up front with cash?"

Michael Sacks, of Sequre Property Investment, added that foreign investors were "corrupting the market" by buying homes above their real value.

"We know that Chinese investment companies are securing entire developments and then selling them to investors overseas for significantly more than they are actually worth, 25% to 35% more in some cases,' he said.

The average price of a UK home hit £272,000 (€348,803, $440,455) in July 2014, a leap of 11.7% over the year, according to the Office for National Statistics (ONS).

Around 240,000 new homes are needed to be built each year in England, in order to alleviate the housing shortage, but only around half of this amount of homes have actually been built.

The FCA has forced lenders to conduct stricter affordability tests on potential borrowers, to ensure they can make repayments in a number of difference scenarios, such as materially higher interest rates.

The BoE has also capped mortgage lending as of October. Banks will only be able to comprise 15% of their net new mortgage lending of loans worth 4.5 times or more the applicant's income.

This suggests that there will be less of those who are low earning will find it increasingly difficult to get on the housing ladder, leaving the market open to more foreign investors buying up property.

However, UK Chancellor George Osborne unveiled a new foreign property capital gains tax that will come into force in April 2015.

In Osborne's Autumn Statement, he revealed that foreign property investors would have to pay capital gains tax in a bid to prevent a housing bubble from forming and to rake in lucrative reserves for the Treasury.

The chancellor said at the time that that CGT would be levied on foreign owners at the same rate as for UK residents.

"Britain welcomes investment from overseas but it's not right that those who live here have to pay CGT, but those who are non-residents do not," said Osborne.

"From April 2015, non-UK residents will have to pay CGT on property in Britain, including selling of that property."

People living in Britain pay 18% CGT and 28% if they make a profit when reselling a property that is not classified as their main home.

People who own properties in the UK and are deemed non-residents are currently exempt from CGT.