Why are overseas investors seeking opportunities in the UK?
Investors from China and the US recently ranked the UK as the best for residential property investment, citing the high demand, shortfall in supply, strong yields and attractive prices as their reasons.
The rental market in the UK is a real cause for celebration for both experienced and new overseas property investors alike. A trend is emerging which is seeing millennials choosing to rent rather than having the ‘burden’ of a mortgage. A subscription-based lifestyle where movies, music, cars and even clothes are rented is evolving and is spilling over into the property market, with many young professionals deciding that rented accommodation is preferable for their fast-paced lifestyles. These are people with high disposable incomes who are actively choosing the benefits and bustle of city-centre living.
It is understandable why it has been predicted by the Office of National Statistics that over 40% of young people in the UK will still be renting by the age of 30 and demand for rental property is thought likely to reach six million by 2025.
This rental demand is a huge part of why the UK property market is so sought-after amongst overseas investors.
Another advantage of the UK property market is that there are many different options to choose from such as:
- Student accommodation
- Hotel rooms
- Fractional ownership
- Residential accommodation
- Holiday homes
All of these options have the potential to be successful revenue streams for overseas investors and all have robust legal frameworks in place to protect both investors and their tenants.
The buying process for overseas investors in UK property
The fact that investing in UK property has long been protected by strong regulations and guidelines is certainly a huge draw for savvy overseas investors.
This creates a level playing field that is relatively easy to understand once you get a handle on the ‘dos and don’ts.
The usual buying process for overseas investors looking at UK property is as follows:
- An overseas investor finds a possible new lucrative investment in the UK.
- All due diligence is conducted before they enter a legally binding contract. This includes obtaining a survey, carrying out local searches and agreeing on the contract terms, all of which are usually done through a UK-located solicitor.
- An identical contract is then signed by both parties (the seller and the buyer) which is legally binding. This is called the ‘exchanging of contracts’. The deposit is paid.
- The completion of the purchase then takes place, typically between one and 28 days after the exchange and the title of the property is transferred to the buyer.
This buying process can often be seen as quite cumbersome by overseas investors who are looking for a self-sufficient property investment in the UK. This is where investment partners like Select Property Group can come in handy as we will do all the hard work for you, and our off-plan opportunities are much more straightforward to process. We can appoint all the necessary advisers leaving our investors free to focus on the high levels of return they will be getting.
UK property investment advice
There are of course several other things to consider when buying UK property from abroad and you can read our UK property investment guide ‘How to invest in UK property’ here for more detailed information. However, as an Overseas Investor Guide, we would be remiss if we didn’t mention the following key considerations:
- Income Tax: Income tax must be paid on the net rental income that you secure from your property investment each year in the UK.
- Capital Gains Tax: This tax is required to be paid when the sale of a property is completed in the UK. It is applicable on the profit you make when selling a property.
- SDLT: Stamp Duty Land Tax (SDLT) is applicable for any residential property purchase in England and Northern Ireland and has to be paid upon completion of the purchase, or completion of the building for off-plan properties. Changes are coming in April 2021, with a new tax surcharge for non-UK resident investors.
- Rental Rules: As a landlord in the UK, you are bound by several government guidelines such as keeping your property free from health hazards. A property management company can handle details like this for you.
- Due Diligence: It is especially important to note that you should ensure you seek legal and financial advice from an independent source before committing to a property investment in the UK. Checking things like service charges and management fees is also a key aspect of buying any rental property and should form part of your decision when choosing a new investment opportunity.
“The resilience of the UK property market throughout Brexit and COVID-19 has reassured both domestic and international investors of the strength of UK property as a long-term investment. A strategic property investment plan can lead to you considering opportunities you may have previously discounted to your own detriment. Partnering with a seasoned developer and property investment specialist like Select Property Group can make all the difference to any investor’s property journey.”
Adam Price, CEO at Select Property Group