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The effect of foreign investors on local housing markets: evidence from the UK

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  • Filipa Sá

Abstract

I use administrative data on properties owned by overseas companies to study the effect of foreign investment on house prices, affordability, construction, and vacant properties in England and Wales. To address endogeneity, I construct an instrument for foreign investment based on political conditions abroad. I find that foreign investment increases house prices. This effect is stronger for more expensive homes but is present at all points of the distribution. Foreign investment reduces affordability and the number of vacant dwellings but has no effect on construction. There is no evidence of heterogenous effects across areas with different housing supply elasticities, since construction is unresponsive even in high-elasticity areas.

Suggested Citation

  • Filipa Sá, 2025. "The effect of foreign investors on local housing markets: evidence from the UK," Journal of Economic Geography, Oxford University Press, vol. 25(3), pages 329-349.
    • Handle: RePEc:oup:jecgeo:v:25:y:2025:i:3:p:329-349.
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    File URL: http://hdl.handle.net/10.1093/jeg/lbae043
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    Cited by:

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    2. Andrey Pavlov & Tsur Somerville, 2020. "Immigration, Capital Flows and Housing Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 48(3), pages 915-949, September.
    3. Yin Germaschewski & Shu‐Ling Wang, 2021. "Distributional effects of nonresident investors on the housing market and welfare," Review of International Economics, Wiley Blackwell, vol. 29(5), pages 1300-1326, November.
    4. Zhimin Li & Leslie Sheng Shen & Calvin Zhang, 2020. "Capital Flows, Asset Prices, and the Real Economy: A "China Shock" in the U.S. Real Estate Market," International Finance Discussion Papers 1286, Board of Governors of the Federal Reserve System (U.S.).
    5. João Pereira dos Santos & Kristina Strohmaier, 2024. "All that glitters? Golden visas and real estate," Working Papers 023, EU Tax Observatory.
    6. Badarinza, Cristian & Ramadorai, Tarun, 2018. "Home away from home? Foreign demand and London house prices," Journal of Financial Economics, Elsevier, vol. 130(3), pages 532-555.
    7. Fischer, Andreas & Zachmann, Lucca, 2020. "The effect of self-financed property buyers on local house prices," CEPR Discussion Papers 14632, C.E.P.R. Discussion Papers.
    8. Chen, Xiao & Guo, Gangxing, 2024. "Air pollution and online lender behavior: Evidence from Chinese peer-to-peer lending," Journal of Behavioral and Experimental Finance, Elsevier, vol. 42(C).

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    Keywords

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    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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