Writing in the Evening Standard the Labour leader Ed Miliband says:
“We will stop developers advertising properties overseas first and ensure they are available for the people that really need them.”
If he became Prime Minister and actually did this he would be soon slapped down by the European Court of Justice for breaking EU law. The rules on freedom of movement of goods and services include being allowed to market products across the EU.
As the European Commission says:
“Free movement of capital is at the heart of the Single Market and is one of its ‘four freedoms’. It enables integrated, open, competitive and efficient European financial markets and services – which bring many advantages to us all.
“For citizens it means the ability to do many operations abroad, such as opening bank accounts, buying shares in non-domestic companies, investing where the best return is, and purchasing real estate. For companies it principally means being able to invest in and own other European companies and take an active part in their management.”
“Capital movements mean any one of the following when carried out on a cross-border basis (i.e. between an investor in one Member State and a financial institution in another):
- Foreign direct investment (FDI), including investments which establish or maintain lasting links between a provider of capital (investor) and an enterprise (in effect setting up, taking-over, or acquiring an important stake in a company or institution);
- Real estate investments or purchases;
- Securities investments (e.g. in shares, bonds, bills, unit trusts);
- Granting of loans and credits; and
- Other operations with financial institutions, including personal capital operations such as dowries, legacies, endowments, etc.”
I’m surprised Labour isn’t challenged more on the incompatibility of it’s policies with our membership of the EU. Last month Fraser Nelson offered a couple of other examples:
He has suggested that he would fire teachers who did not have “qualified teacher status” – no matter how competent they were. Happily, this would be illegal under European law. They signed a contract, so the school cannot tear it up – no matter what the next education secretary says. The same strictures would stop Labour abolishing the new performance-related pay for teachers, or ripping up the contracts of private clinics that have signed long-term deals with the NHS.
His plan to cap the market share of large banks would probably also be in breach of EU rules. Even the energy price cap would be tricky. By the way I don’t agree with Mr Nelson that “happily” the EU would stop a Labour Government doing what it wants. Those of us who are democrats should regard the solution as being to prevent Labour from being elected – and if they are elected to have them voted out and their damage reversed.
Anyway, back to housing. Even if Mr Miliband was able to impose this ban, it would be wrong. London should welcome wealth creators arriving in the city. Those who buy property as an investment rather than living in it tend to rent it out – for the obvious reason that they make more money that way. So that is providing housing for Londoners.
A survey by the Home Builders Federation found that overseas buyers account for 6.5 per cent of sales by value – the same as in 1990. Even in prime locations over 85 per cent of new build sales to overseas buyers are occupied – in London as a whole it is even higher.
The Federation has agreed a voluntary commitment to market homes first, or at least at the same time, in the UK as overseas. Selling a British property to someone resident in the UK is easier from an administrative point of view anyway. Rob Tincknell, who is overseeing Battersea power station’s regeneration for its Malaysian owners, said:
“Londoners have seen it sit derelict for 30 years. It’s only right that we launch in London first….If we can find 100% of buyers in London, brilliant — why would you traipse all the way to Moscow?”
As the economy grows, the ratio of new properties sold abroad is likely to fall. The Bank of England’s financial stability report from November estimated that foreign buyers represent just 3 per cent of all residential transactions in London, and were concentrated in ‘prime’ central areas of London.
However, sometimes foreign investment can be crucial in a development being viable. If construction did not take place there would no new homes for anyone. That is why meddling with the market is so self-defeating.
How does Mr Miliband define a foreign buyer anyway? If a businessman from Ireland or France has been renting for a year in London and then decides to buy would he be a foreign buyer? Or if he had been here for five years? Or ten years? Perhaps Mr Miliband doesn’t regard our fellow EU citizens as foreigners – he accepts that the restrictions couldn’t apply to them. Still while the Bulgarians and Germans could be given first dibs on snapping up a penthouse at least he could insist on keeping the New Zealanders to the back of the queue.
Mr Miliband might be chasing UKIP votes with his drift towards economic nationalism and so feel he is coming up with some good politics. But at least UKIP follow through the logic by favouring withdrawal from the EU. This marketing ban would unravel when it is found to be unworkable – and it is hopeless economics anyway. His approach is to lurch from one gimmick to the next hoping that be the time the practical difficulties are spotted the media circus will have moved on.