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.
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.
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.