The UK property market is set for another impressive year in 2018, with predictions of widespread price rises in the housing sector and a growing appetite for commercial property investment up and down the country.
Investors into the UK from across Asia, Africa and the Middle East should therefore consider the wealth of opportunities that will be open to them in the coming months.
Growing appetite for regional investment
Throughout the UK, a number of regional cities are coming to the fore in terms of their popularity among overseas investors at present, and this is a process we expect to see gaining further ground in the coming year.
Cities including Manchester, Liverpool and Edinburgh have been at the forefront of investment activities during recent months, with a range of large-scale projects getting off the ground. Significant transactions completed by overseas investors in the last year include the £300 million purchase of the Liverpool One shopping centre by Abu Dhabi Investments and a £400 million investment in the regeneration of Edinburgh centre by Dutch pension fund APG.
At the same time, significant opportunities continue to flood in for overseas investment in other parts of the country, with the Department for International Trade highlighting an ongoing £500 million investment in Birmingham’s Curzon district and a £7 billion overall investment portfolio for the Midlands.
Improved returns have been cited as among the standout reasons for increased investor appetite outside of London at present, with the relatively untapped regional markets providing improved value due to the lower relative cost of buildings in comparison to the capital.
Demand for property – particular in build-to-rent, student and hotel accommodation – therefore remains strong across the UK, with 2018 expected to be a continuation of the upward momentum that has been witnessed throughout 2017 for investor activities.
Financial changes for overseas investors
One issue that may arise for overseas property investors in 2018 is the potential introduction of a new capital gains tax for all foreign buyers into the UK property sector. Concerning financial gains made by non-residents on sales of all types of UK real estate, the new levy will act as an extension to existing rules and aims to address a perceived domination of the London market by overseas buyers.
Indeed, research published by Colliers states that around 75 per cent of all central London property investment is now carried out by foreign investors. At the same time, the UK remains the largest commercial property market in Europe, attracting €26.7 billion (£23.5 billion) of foreign investment in the first half of 2017 alone.
However, this new levy may not be as much of a disincentive to investors as many might fear, as Dan Neidle, partner at law firm Clifford Chance, explains: “Almost every other jurisdiction taxes foreign investors on capital gains, so [this] change shouldn’t make the UK less attractive than other potential destinations.”
Meanwhile, ongoing weakness in the value of sterling in foreign exchange markets continues to represent a significant opportunity for overseas investors moving into the UK property sector in the coming year. The devaluation of sterling helps to ensure foreign investors are able to get the ‘most bang for their buck’ at present, with ongoing economic uncertainty and the spectre of Brexit meaning there is unlikely to be any sharp rise in value for the currency anytime soon.
Overall, the UK should continue to prove a highly attractive market for foreign investment for the foreseeable future, with 2018 holding the potential to return significant gains for overseas investors who appreciate the opportunities they currently face.