title: Essays on foreign demand and housing markets
Creators: name: Agyenim-boateng, Cornelia
Publisher: name: University of Reading
Year: 2023

description: The evolution of globalisation and the financialisation of markets have partly driven the 
growth in foreign investment. Foreign investment in residential property markets is often 
seen as a long-term investment strategy either of a portfolio diversification sort or as a 
vacation home. The pattern and number of properties purchased by foreign investors in the 
UK have seen unequal and varying quantum across England and Wales over the years. The 
overarching objective of this study is to examine the drivers and impact of overseas investor 
activities in the UK housing market at national and local levels.
What is more interesting has been understanding the components of foreign investment in 
the UK housing market. The data which contains information about buyers are detected to 
be companies that are registered overseas. Further analysis and exploitation of the data reveal 
that these companies may be of three sorts. First, companies owned by entities domiciled in 
the UK, be they firms or individuals that resort to using tax havens as a way to avoid tax or 
benefit from the available tax incentives. Secondly, foreign corporate or individual investors 
with similar incentives in relation to their own home country and last but not the least, other 
foreign firms or individuals for whatever reason who wish to use such corporate shell to 
invest in UK property. Each type cannot be distinguished individually in the data. 
However, light is cast on their motives and their impact on the housing market by 
investigating the market conditions under which they invest. This is done through data 
modelling and analysis of housing purchased by overseas companies in England and Wales 
both temporal and spatially over a 24-year period between 1996 and 2019. At first glance, 
the distribution of properties has a bias towards Greater London Authority in terms of the 
aggregate sum of the properties; however, consistently in the last decade, there has been a 
trending growth of properties in other non-traditional local authorities, which makes the 
geography of the foreign investment an interesting area of the research. The analyses in the 
thesis make use of three geographic unit levels – national scale, regional and local authority 
areas – to answer three important research questions on the determinants, locational choice, 
pull factors and the spillover effects of foreign investment in the UK housing market. The 
first research objective is set to understand the drivers of the national scale of the property 
purchasing activities by companies registered in tax havens (CRTH). Secondly, the drivers of 
spatial distribution at the regional level and variation in it over time are explored in relation 
to the locational preferences of foreign investors and pull factors contributing to the choice. 
Last but not least, cross-section on local authority areas in England are used to determine
the spillover effects of foreign demand in local housing market. Ultimately, beyond the origin 
of capital into the housing market which has been a major focus in the literature, where these 
property purchases are made are equally important as the activities of foreign investment are 
claimed to complexly interact with local economic dynamics. The thesis thus combines time 
series, panel data and cross-sectional data techniques to expound on push and pull factors of 
foreign investment and the implications eventually on local housing markets. 
In the first stage analysis, it is inferred that the drivers of foreign investment in UK housing 
market at national scale are reinforced by macroeconomic fundamentals and institutional 
qualities of the UK including exchange rate, inflation, corporate tax, house price, rule of law 
and OECD agreement. This is determined through the use of Structural Vector 
Autoregressive (SVAR) method to analyse times series of national scale of this activity under 
an eclectic paradigm theoretic framework. 
Secondly, it is determined that regional pull factors such as socio-economic factors and the 
supply of new houses through regeneration projects and the Housing Market Renewal 
(HMR) Pathfinder policy have influenced the new trend of overseas buyers in areas that 
would traditionally be known as low demand. This hypothesis is tested with a difference-in-difference technique that assesses the significance of the introduction of a housing renewal 
policy that aimed at refurbishing old and dilapidated buildings and building new properties 
with the goal of transforming neighbourhoods to attract demand. The result from the 
estimation indicates the significance of the renewal programme on foreign demand.
With the flow of overseas investment overwhelmingly coming from nations/localities 
designated as tax havens it is difficult to distinguish between genuinely foreign and domestic 
firms/individuals thereby terming these investors as Companies Registered in Tax Havens 
(CRTH). Both are using tax efficient/minimising investment vehicles. Such approaches are 
often viewed negatively as tax avoidance, but the findings here suggest a more positive view 
that the tax breaks stimulate greater investor preparedness to commit to more potentially 
riskier parts of the housing market – new build flats in regeneration areas. Consequently, 
without these investment routes, neighbourhood regeneration and housing supply may well 
be less. 
Thirdly, using spatial Durbin model, and with focus on local authorities in England, it is 
found that the effect of foreign demand at the local level is positive with a spillover effect 
on contiguous areas. 
Summarily the major findings portray that overseas buyers are important in UK housing 
market. They are primarily investors (with some localised exceptions), attracted to England
by housing market characteristics and broadly behave like other investors about market 
dynamics. The results have indicated that foreign investors may be less risk averse than other 
investors because there is a high and increasing propensity to invest in regeneration areas. 
This helps stimulate supply in these areas and encourages further development in contiguous 
regions. As such foreign investors do not necessarily crowd out domestic housing demand 
as much as is often claimed because of firstly their stimulus effect on housing supply in 
rundown areas undergoing neighbourhood transformation and as potential investors they 
provide homes for tenants living and working in the UK.