Merryn's Blog

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.

141103-london-property

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.

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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.

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.

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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.

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