UK Tightens Controls on Overseas Property Investors
Lord Faulks and Lord Hodgson have had their call for a public register that gives transparency to foreign owners answered. Faulks laid down his amendment because there is a widespread problem with foreign companies coming to England, particularly central London and buying up property, and the finances used to buy the property comes from suspicious sources.
Faulks is right – everyone does know that London is a hub for money laundering and exploitation of offshore tax regimes thanks to the release of the Paradise Papers and the Panama Papers. Although the UK has been investigating criminal investigations since 2004 and has investigated more than 180 million pounds worth of real estate for its connection to corruption, the Panama Papers released in 2016 demonstrate that London is still a central hub for foreign buyers and their dubious funding.
London has a mix of penthouses, luxury apartments, high skyscrapers and is a global business hub. England and Wales have more than 120 billion worth of property owned by offshore firms, although some of them are clean and fine, the UK government is going to be the first to release the register that will ideally prevent and uncover those with murky money seeking to buy property in the UK.
What is the Register?
Overseas companies will have to provide disclosure over the ultimate owners of their property and investors who do not comply with the public register will face criminal sanctions and lose the ability to create a long lease or sell their property.
Business Minister Greg Clark has suggested that this register will build on the UK's reputation for corporate transparency and create a more hostile environment for economic crimes. The register, which requires foreign investors to declare beneficial owners, will reduce opportunity for criminals to use shell companies to buy properties in London as well as make it easier for law enforcement to track and take action against the criminal activity.
The timeline established for the public property register is 2021, with draft legislation completed by this summer. However, not everyone is happy with the timeline and many believe that overseas owners of UK property will welcome the extended time to adapt to the policy changes. The Head of Advocacy and Transparency International UK, Rachel Davies Teka, welcomed an overdue timetable for the register, she also stated that it has taken too long to get to this point and Lord Faulks and Lord Hordgson would prefer the register be established in 12 months.
Foreign Investment Increases Property Prices
You want to encourage foreign investment; it is part of a healthy and dynamic economy. However, property investment from foreign investors in the UK has kept property prices artificially high and unattainable for many UK residents who simply want to buy a house that they can call home. There is a wide variety of factors that have affected the deteriorating affordability in the UK property market for years, but ideally creating more transparency with foreign investment, will also create more affordability for honest buyers.