Tighter rules for mega-rich foreigners could dent London property prices

Soon, the mega-rich won’t be able to use prime property investments to buy British citizenship.

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Prime London property: no longer an easy way in

I wrote here last week about how politics in Britain (the referendum, the mansion tax etc) may well spell the end of the boom/bubble in prime central London property prices.

More evidence of this comes this week with changes to the Tier 1 visa system. Until now, getting the right to be a permanent resident of the UK has been pretty easy and effectively cost-free for rich foreigners.

Invest £1m in the UK and you could buy the right to stay for five years, then to apply to be a permanent resident, and then, six years in, to apply for citizenship. Invest £5m or £10m, and you can move the whole thing along even faster.

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However, that investment has not had to be in anything that adds value to the UK as a whole instead, houses and government bonds have done perfectly well. You could have put £750,000 into bonds and £250,000 into property, knowing perfectly well that your odds of losing your money were minimal.

But from Thursday, the total amount you need to shovel into the UK will rise to £2m (still pretty cheap if you are a rich citizen of a horrible place and want to live in a nice place). But property will be excluded.

You will still be able to buy relatively safe equities and bonds (I say relatively, because inflation means bonds are never really safe) . But not central London houses.

This won't have much of an effect on its own the numbers for Tier 1 are relatively small. But it is another indication of the political direction of travel.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.