Real estate investors looking at buying UK property will be pleasantly surprised with what is on the housing market and how quick you can invest in this niche of real estate. Whether you want to become a landlord with a decent rental yield by renting out to tenants or only looking for a second home with maximum capital growth, there are many options.
Residential property, buy-to-let homes and off plan developments with discounted cash prices are attracting investors from all around the world. When it comes to new build sales, a report by the London council showed that in 2016, foreigners made 13% of all sales. Looking at the broader picture, at England and Wales, in 2018, Step.org said foreign companies owned nearly 100,000 homes.
Indeed, people often ask us if foreigners can buy property in the UK, and the answer is yes, it is an ideal location for long-term investment. However, the critical factor is to already have finances in place since getting a mortgage is hard. With that in mind, let’s look at what you need to know when entering this market.
Whereas some countries have one type of ownership in place, both freehold and leasehold exist for the UK. Typically, flats and apartments in shared communal buildings are leaseholds, which is where you only own the property for a fixed time. These can be as short as 40 years or as long as 999 years.
This is where local research pays off. Some landlords invest in rental properties; hence they buy in big cities like Manchester, Birmingham or Nottingham, where there is a substantial student population. Others turn to the holiday let market so head for the coastal holiday towns and villages. Overall, there is a noticeable trend leading the whole UK real estate market, and that is demand is slacking off in southern regions but rising in the north.
One destination cashing in on this trend is Manchester, of which the local council is also investing heavily in transport and infrastructure. Cities like this also appeal to first time home buyers, because London is generally out of their housing bracket. As a rough guideline, a semi-detached townhouse for sale in Manchester city centre starts in price at around £290,000. The average starting price to buy a flat in the UK is £130,000. This is for a new build development.
Once you have found your ideal home and want to make an offer, it is not until a formal contract is signed and exchanged that it becomes a legal sale. Bear this in mind, with areas that are popular because outbidding and gazumping is still practised. A down-payment can snitch the deal though, and this is typically between 5 to 10%.
For a contract to be drawn up, your solicitor will first carry out all the legal checks. This involves various aspects like a title search and survey. At this point, if you are applying for finance from mortgage lenders, they will also want a study and property valuation to confirm its value. Once complete and everything is in order, a contract confirms the sale.
Once the solicitor confirms all legalities, the next stage of the payment plan kicks in, and then you can sign for the title deeds and move in. Know that if you buy an apartment, you are legally obliged to pay a service fee, and this goes towards upkeep and maintenance of the communal areas. It is during the time of taking ownership that you will also need to pay stamp duty.
Although the buying process is straight forward, it takes roughly three months for the sale to be complete. The part that confuses even the savviest purchaser this most is the tax implications. For properties over £325,000, inheritance tax is a staggering 40%. Some people instead buy the property as a company or via a trust, which leads to charges every six years.
Likewise, for most non-UK residents, the capital gains tax still applies. This is a charge between 18 to 28% depending on the value of your property. There are different guidelines for buy-to-let homes and income tax, depending on whether they are long term or holiday homes. Read about that here.
More information: The above advice on how to buy a house in the UK and what to consider when looking to invest in properties is guidelines only. For more in-depth information about becoming a UK homeowner or to speak to an estate agent, please contact us today.
Additionally, see our portfolio of properties for sale in the UK. Each listing includes everything to know, including price, photo, how many bedrooms, how many bathrooms, map location, home features and how to arrange a viewing.
Student Rental Property Market: For investors looking for a healthy rental income with high demand, and suitable tenants, the student market is one option. Cities like Cardiff with a healthy turnover of adults in upper-level education are just one option. In this article, we talk about this growing market and how to maximise your real estate investment.
UK Real Estate Blog: For more advice, hints, and tips on buying UK property, see our estate agency blog archives that talk about all destinations and need to know aspects of this market. As professionals, we can advise on all aspects of purchasing a home and buying an investment property.