The UK remains a very popular place for people to invest from overseas, thanks to its stability and the fact they can get strong returns from their investment
Investing in property in the UK is increasingly popular with people from other parts of the world, Middle East, Chinese and North American buyers, among others, have become some of the most prevalent investors in the UK, thanks to the strong returns, growth in prices, and resilience, that the UK market often shows.
Even through financial crises and political uncertainty, UK property continues to perform well, which is why it is popular with those from overseas, who cannot find that stability elsewhere. But if you are investing in UK property, there are some top tips you need to know.
Here are the 7 most important things to consider before you invest in UK property as a foreign investor:
- Knowing what you want from the property purchase
- Financing the investment
- UK taxes and other legal requirements
- Currency exchange factors
- Choose the right location
- Knowing the buying process
- Strategizing and management
2. Financing the investment
One of the most important considerations that anyone coming from overseas to invest in the UK has to make is how they are going to finance their purchase of property.
Many foreign buyers coming into the UK market will make cash offers, because it allows them the best chance to secure a deal, but there are other avenues it can be worth exploring.
While mortgage products are available both in the UK and in many other nations, off plan property tends to require cash buyers. Those wishing to invest with a mortgage should seek professional advice before doing so to ensure that their financial obligations are fully taken into consideration.
Investors entering the off plan investment market will often find that payments are spread out over the course of construction. This is particularly useful for overseas investors in countries that impose restrictions on the amount of money that can be moved overseas by individuals. In this scenario, it is worth speaking to the developer to ensure that funds can be transferred in a timely fashion to ensure that contracts are not breached.
Projects with favourable stage payments often appeal to those in countries which have tighter limits on transferable funds overseas.
4. Currency exchange factors
Data released by JLL has shown that Asian investors made up 28% of UK property transactions in 2016, up from 17% in the previous year.
In part, this increase has been driven by the falling value of sterling in light of the UK’s decision to leave the EU in June 2016.
The Office for National Statistics explains that, “The depreciation in sterling shortly after the EU referendum coincided with increases in the number of positive respondents to the other gains and losses question on the FDI [Foreign Direct Investment] survey, which contributed £33 billion to the £65 billion increase in FDI assets in Quarter 2 2016.”
As most overseas buyers are cash purchasers, the fall in the value of sterling has enticed more people who are looking to generate an income from or own a property in the UK.
Chinese and Hong Kong based investors have continued to snap up UK property since Brexit, spending £2 billion a year since 2013.
6. Knowing the buying process
Once you have found a suitable property that matches your requirements, it is then time to put in an offer.
When buying through Experience Invest, you will also be required to pay a reservation fee which will come off your final balance.
The legal Exchange of Contract and transfer of the property (conveyancing) is the next stage. You will need a solicitor or a licensed conveyor for this.
You will need to appoint a Solicitor at this stage. Ensure you clarify whether VAT and/or disbursements is/are included in the upfront quotation. Conveyancing proceeds through an exchange of notes between the Seller’s Solicitor and your Solicitor. A “Draft Contract” will be drawn up by the seller’s solicitor containing the price and information about the Seller’s Title Deeds, etc.
Your solicitor will check this and negotiate with the seller’s solicitor. Searches, enquiries and surveys undertaken on your behalf will include a Local Authority Search, to check that the property is not in the way of any project; a search at the Land Registry to check security of title. Other enquiries will check on things like mineral rights, flooding, pollution, etc. This part of the conveyancing process will take a minimum of two weeks and up to 8 weeks.
Once you and your solicitor are satisfied, you sign final contracts. This process binds both parties legally. At this point you hand over a non-refundable Exchange deposit. If the property is off plan it is now good practice for the clients’ funds to be held in a client solicitor account, which is then release at drawn down stages during the building upon satisfactory stages of the build and Architect Certification.
A transfer contract documenting the transfer of title will next be prepared and signed by both parties. A Completion date will also be agreed upon. Between the contract signing and Completion Date, proper arrangements with the Land Registry office are made: Stamp Duty and other fees connected with registering are paid. Payments are now completed and the deeds are handed to you.