International Investment in London Residential market effect the house price, demand and supply for local population

Research Pilot Paper
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CONTENTS
TITLE: “International Investment in London Residential market effect the house price, demand
and supply for local population”......................................................................................................3
INTRODUCTION...........................................................................................................................3
Overview and background of study.............................................................................................3
Research Objectives.....................................................................................................................5
Research questions.......................................................................................................................5
SELECTION CRITERIA................................................................................................................5
RESEARCH INSTRUMENT PROTOTYPE..................................................................................6
PROPOSED DATA ANALYSIS TECHNIQUES..........................................................................9
Data Analysis...............................................................................................................................9
Data Interpretation.....................................................................................................................11
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................18
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TITLE: “International Investment in London Residential market effect the house
price, demand and supply for local population”
INTRODUCTION
Overview and background of study
The housing investment is considering to be one of the most significant and long term
investment that an individual perform within his or her life. When it is considering in economic
term the house price within equilibrium are mainly set by the balance of demand as well as
supply. Even within equilibrium the price gets beyond the budget for some household that make
them unable to pay and get access to home ownership. This happens due to increasing cost of
living, overcrowded area, insecure tenure, high rent charges etc. The housing price within
London are relatively higher and are constantly rising the faster rate that country as a whole. The
main reason behind it is increasing international investments (Akimov, Stevenson, and Young,
2015). This is so because the measures of foreign investments are directly using the new data set
which is released by the Land Registry which contains information regarding all the property
transaction within England and wales registered to overseas companies. The foreign investments
are considering to have a positive as well as significant effect over the house price. This is
because with the increase in one percent point in the volume share of residential transaction
registered to overseas company results into an increase of around 2.1 percent within the house
price.
The increase in international investment within eth London residential market affect the
price, demand and supply of it for local population to a great extent (Auspurg, Hinz, and Schmid,
2017). As housing is a thing which is mainly demanded by the people in order to get access to
local facilities, employment opportunities as well as other kind of services provided within a
country. And due to all this the desire for purchasing a house will get affected by demand for
these other market. The higher price within a particular area may therefore affect a relative
abundance of amenities and offering residence the high quality of life. The London is
considering as home for several institutions, business houses and bank which consider to be a
major factor which attract more and more people to come and stay for availing the utilities and
amenities which this city usually provide (Baptista and et. al., 2016). This in turn attract more
people from foreign countries in search of job opportunities as well as a better life to stay within
London and hence their moment in country is high which increases the price of residential
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purchases which in directly affect the supply of housing. Other than this several business belongs
to other country also hold up their branch within London due to its higher spending rate which
help them in getting better earning of profit (Bonell, and et. al., 2015). So, these organizations to
purchase the houses for their staff members which in turn increases the price of housing. Other
than this for setting up their business and other branches within city they also invest more over
its development which bring up foreign investment over the land of London which is relatively
higher rate. So when the real estate dealer of London gets better earning from the overseas
investors then they usually increase the price of their Land and hence it increases the price the
residency lands and building which further affect the affordability of local people. Hence it can
be said that local population is highly affected with eth international investments that are going
within country from overseas.
The involvement of overseas investment is relatively higher within several properties
specially residency in London. Almost all of the London’s large residential development sites
used overseas investment for getting them a speed up development and a quick start to project
(Nuuter, Lill, and Tupenaite, 2015). Additionally, many build to rent schemes also get benefited
with the overseas funding which the development process and are owned by the foreign
institutions. Hence, it can be said that the international investors are very much interested within
the property of London and remain focused toward investing over it as they found huge return
over it. This is the main cause that international investment has a huge impact over the demand
and supply of residential property within London and hence it affects its price which make it
difficult to afford for local people. The overseas buyer is investing within London property from
years by countries like USA, Russia, Arab countries, Europe, Africa etc. Mainly investors invest
within the estate in London is to hold the money for some time in the form of real estate and then
get it sold in higher amount to get a significant return over this (Moser, and Kalton, 2017).
Therefore, it can be said that the strong long run performance of London housing relative
to alternative investment contributed a lot toward the London’s housing stock which is being
increasingly seen as a vehicle in order to hold money and acting as possible further incentives. In
context of foreign ownership, the evidence on it suggest that it is responsible only for the small
share of transaction and likely to present only modest effect over the house prices within
London. There are also remain certain factors which suggest that following the economic crises,
the more demand for the new build properties may have extend lessened the negative impact of
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credit constraints over the construction activity. The purchasing price of a house is not same as
cost of owning a home (Leone, Haynes-Maslow and Ammerman, 2017). Buyers, specially the
first time buyers have to face a significant upfront cost within buying a house. In so far with the
high house price in London are usually supported with the low cost credit which in turn may
make the economy vulnerable to risk of price correction, particularly of the price of borrowing
get rise or access to credit. The demand among the overseas buyers for housing in London is
mainly driven by the desire of living and working within London, but it is also driven partly from
the natural changes in population as well as social economic factors that driven household
formation. This demand results into coupled with increasing ability to finance home ownership,
upward pressure over the price of housing in capital (Hulse, and Yates, 2017).
The house prices in London are high and have been increasing speedily than nation as a
whole. It is specifically true in desirable boroughs in Central London which medium prices of
house in year 2014 is as high as 860000 pounds in Westminster. Many ups and downs have been
witnessed in the housing market of London with volatile prices of houses tending to amplify
alterations in National house prices. Though, falls in nominal value of average home is rare,
several episodes of deflation of real house price has been experienced in London since ONS data
series initiates in year 1969. According to the previous cycles patterns, no clear trends are there
from price data to suggest whether the house prices in London are approaching a peak or a more
exceptional decline adjustment. The house prices ratio to mortgage holders’ income gives an
alternative affordability measure. On the basis of this measure, the pre-crisis average prices of
house in London ranged between 1.9 - 3.5 of mortgage applicant’s income. Housing prices
standard measures in terms of link between earnings, incomes and house prices, thus advise that
an increasing affordability gap is there. With the growth in buy to let market and private rented
sector and overseas ownership, two extra components are there of demand in comparison to the
past. It is also evident that the extra demand of new developed properties might have to some
degree lessen the adverse influence of credit constraints on the activity of construction.
In purchasing a house, buyers and specifically first time purchasers face relevant upfront
cost. In London, the housing demand is partially driven through desirability to work and live in
London as well as is partially driven through natural changes in social economic forces and
population which drives formation of household. The implications of knock-on effects and
market distortions can we serious and influence profoundly on the economy of London as well as
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wellbeing of its citizens. The increase in prices of houses which are unrelated to significant
drivers of supply and demand can create a threat to stability of economy. House price inflation
maximized indebtedness comparative to income as well as distorted economic behaviour. High
prices of houses have also been related to numerous social challenges including overcrowding,
sub-standard living situations and insecure tenure. It may present serious outcomes for
wellbeing, health and sustenance of population of London. Lack of affordability placed
maximized pressure on domestic public finances, for instance, maximizing Reliance on benefits
of housing along with the cost related to education health and lesser extent, offending and crime.
There are several issues related to house price affordability including quality terms, efficiency
terms etc.
Research Objectives
The key objectives of this research study are mentioned below:
 To get understanding about Residential market of London.
 To assess the role of international investors in housing market of London.
 To assess the impact of international investment in London housing market on house
price, demand and supply for local population.
Research questions
The questions in relation to this specific study are as follows:
 Discuss and evaluate the role of overseas investors in London Housing Market?
 What are the social and economic aspects of International Investment in London
Residential Market?
 Critically evaluate the implications of foreign investment in London housing market on
price, demand and supply?
SELECTION CRITERIA
The current investigation is based on “International Investment in London Residential
market effect the house price, demand and supply for local population”, which support in
presenting data regarding the manner in which foreign investments bring influence over the
house residency market of London (Hochstenbach, and Arundel, 2020). This will further support
in determining the actual reason due to which the demand and supply of housing market is
getting affected within London. In order to conduct this investigation, the primary source of data
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