Investing in UK property from overseas? Here’s what you need to know

No matter where you are in the world, the property market is often considered a relatively safe and worthwhile investment. However, for British expats or other overseas property investors ready to invest in the UK market, the British systems can be unfamiliar and potentially even off-putting. We’ve put together a list of some of the things you need to consider when looking to invest in property in the UK.

The buying process

When purchasing a property in the UK market, it’s beneficial to familiarise yourself with the process. While it may be vaguely similar to other countries – particularly those in Europe – the UK has its own systems in place that can prove tricky to negotiate if you don’t take the time to research beforehand. However, the general process is as follows:Establish your budget: Make sure you understand your financial situation and take into account any additional costs associated with property purchase. In the UK, these costs include a cash deposit, stamp duty, legal fees and agency fees

  • Speak to experts: If you’re unfamiliar with the UK property market as an expat, take the time to find an independent specialist who can help you get to grips with terminology such as ‘leasehold’, ‘stamp duty’ and ‘conveyancing’
  • Select your preferred property: The type of property you buy will likely depend on your personal circumstances and the area you’ve chosen for your investment. If purchasing to rent out, consider your target market and select a property that would appeal to them
  • Mortgage application: Speak to a mortgage broker or adviser to discuss your mortgage options. You may wish to speak to your current bank or look elsewhere for the best possible deal
  • Conveyancing: You will need to get in touch with a local solicitor who will handle your paperwork and conduct searches on your behalf
  • Contract exchange: When you exchange contracts you will also need to pay the agreed-upon deposit. At this stage, you could face a penalty charge if you pull out of the sale
  • Complete your sale: Once completion has taken place, the property will officially be yours. If you have purchased a property that’s still being built, completion is likely to be later than with other properties.

UK property is in high demand

No matter the political situation or exchange rates, the UK’s housing market is often a popular choice when UK expats are looking to invest. The main reason for this is the market’s resilience, which has proven itself time and again in spite of economic and political turmoil. For overseas property investors seeking a relatively secure investment, UK homes are often considered a strong bet.

Some of the recent pressures facing the world of property investment in Britain have included Brexit and Covid-19. But in spite of this, house prices have continued to rise to a high of 32% up in December 2020 compared to the previous year. Looking forward, investors are expected to face competition from their peers as market optimism continues, with many property think tanks predicting a rise of up to 5% in house prices in 2021.

The downside of this news is that there is likely to be an undersupply of many types of property, particularly in areas where the rental market remains strong. However, investors can expect to enjoy the same ROI themselves having taken the plunge into this prosperous and largely healthy market.

You will have to navigate the legalities

As an overseas buyer, you will be expected to pass a number of due-diligence checks, even if your mortgage is held in the UK. These checks are in place to help funding sources confirm your identity before your purchase goes ahead. Unfortunately, this process can take some time, so it’s best to find out what is expected of you at the beginning of the purchase process.

UK property investment can also present a number of unfamiliar concepts and terms. The leasehold system, for example, is present across most of the UK. The majority of apartments are sold on a leasehold basis, as are some new-build houses. These properties are often subject to a ‘service charge’ to cover the costs of maintenance in communal parts of the building. Leasehold properties can also require the renewal of the lease on the individual property, which can cost an additional sum. These costs should be considered before you take on such a property.

Overseas investors are taxed differently

When purchasing a property in the UK, you will have to pay Stamp Duty and Capital Gains Tax at the same rates as UK buyers. In addition, as an international property investor you will also be required to register for the Non-Resident Landlord Scheme, through which you will be taxed on profits from the UK investment. However, these profits are not included as taxable profits when paying tax in your home country.
You may have various banking options

Before purchasing a property in the UK, you should consider opening a bank account in Britain – if you don’t have one already. This often requires proof of ID and proof of address, but you will need to find a bank that accepts an address in another country. Larger banks are often more flexible when it comes to your location.

However, if you already have an account with an international bank that has a UK presence, you could just make use of their UK facilities. In general, international banks are the most likely to facilitate overseas property purchases with minimal additional paperwork. Many also have financial advisors on board to help you navigate the financial aspects of investing in property overseas.

London isn’t always best

When looking at the UK property market, it’s easy to see why London is appealing. While not always the cheapest area, London’s property market benefits from an ongoing and almost unwavering value increase, making it a fairly safe choice for those with knowledge of its up-and-coming boroughs and districts. However, there are many other parts of Britain that are worth considering.

When it comes to achieving a solid return on investment (ROI), popular areas outside the capital include Manchester, Birmingham and Leeds. Before making your choice, take the time to understand the local area, researching demographics, investment opportunities and plans for infrastructure development.

While no investment is ever 100% secure, property investment in the UK can be a fruitful and reliable way of achieving your financial goals. At ExpatRoute, we have the information that can help you navigate the UK property market from overseas. No matter what your circumstances, we can provide guidance to help you make the right choices and invest in the right property.

To find out more about property investment in the UK, contact a financial adviser.

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