The Effect of Foreign Investors on Local Housing Markets: Evidence from the UK

Abstract

I use newly-released administrative data on properties owned by overseas companies to study the effect of foreign investment on the housing market in England and Wales. To estimate the causal effect, I construct an instrument for foreign investment based on economic shocks abroad. Foreign investment is found to have a positive effect on house price growth. This effect is present at different percentiles of the distribution of house prices and is stronger in local authorities where housing supply is less elastic. Foreign investment is also found to reduce the rate of home ownership. There is no evidence of an effect on the housing stock or the share of vacant homes.

Keywords: foreign investors, House Prices

JEL Classification: F21, R21