UK Buy to Let Popular for Overseas Buyers

Written By PropertyLoop
February 11, 2021

UK property is proving an attractive choice to overseas buyers – thanks to low interest rates and the current Stamp Duty Holiday.  

But the clever foreign investors and UK ex-pats know they need to buy now. That’s because after April 1, 2021 they will have to pay an additional two per cent in Stamp Duty charges.  

At present UK and foreign buyers in England are enjoying a Stamp Duty Holiday where there is no charge on properties worth up to £500,000. It’s similar for properties in Scotland and Wales – although the maximum amount is not as generous (it’s £250,000 in Scotland, for instance). Despite this, many online property agents are reporting record numbers of enquiries. 

By the same token, mortgage lender – Skipton International – has seen increased overseas buyer activity for UK properties over the past few months. To the extent, the firm’s managing director Jim Couple described the company as being “inundated” by interest from foreign buyers, and potential landlords in particular. 

Non UK resident buying UK property, PropertyLoop

Mortgage Lenders Pulling Low Loan-to-Value Deals

Thanks to Covid-19 resulting in national lockdowns and potential job losses, the Bank of England won’t increase interest rates for some time. However, this economic uncertainty has led to a number of nervous mortgage lenders pulling generous loan to value deals for potential buyers, as a result. Online property agents say first time buyers in particular have been particularly badly hit in this respect. This is another reason why potential buyers should act now ie before mortgage deals get even tighter. 

Foreign Exchange Rates Are Good as No Deal Brexit Looms 

Meanwhile, another reason overseas investors are keen to buy UK bricks and mortar is because exchange rates are extremely competitive for them right now. And, with a No Deal Brexit looming, many are aware it’s time to strike while the iron is hot, so-to-speak. Certainly, there is no question that bricks and mortar will always prove to be a more secure investment than the stock market – any online estate agent and financial expert will tell you that. 

Meanwhile, on a more negative note, there shouldn’t be any surprise to learn that the recent buying spree in the UK has led to backlogs in sales being processed and transactions going through. The overseas market is no exception.  

Some authority voices from the UK property industry including the investors themselves said them and other colleagues were noting delays, especially with surveys coming through. As a result, sales transactions weren’t being processed as quickly as usual. 

Best Buy to Let Locations for Foreign Investors 

When it comes to investing in buy to let, location is probably the most important aspect to get right. Investors must buy in areas where they know their ideal tenant wants to live. However, there is also the matter of yield ie how much rent can be charged compared to the cost of buying the property in the first place? A leading offshore bank, leading the way with a wide range of offshore accounts and mortgages is still finding plenty of interest from foreign buyers for properties in London and the south-east of England.  

However, northern cities are proving more impressive when it comes to yields – especially the likes of Manchester, Birmingham and Liverpool. Thanks to regeneration and property development in these cities, as well as many firms moving their HQs to less expensive areas, populations in these spots are increasing markedly. 

Another study, this time by Landlord insurance company found the most popular buy to let locations in the UK were Manchester, Salford and Leeds.

Does buying a house in UK gives you residency? PropertyLoop

Foreign Investment in UK Property Market

Recent figures have revealed that there has been great interest in the UK property market from foreign investors, with the total of this foreign investment reaching a staggering £1.5 trillion in 2018. Since this record foreign investment in UK properties has shown consistent growth at 5% each year.  

However, with the stamp duty holiday having come to an end in April 2021 the poignancy of foreign investment within the UK was in question as overseas buyers would be subject to an additional 2% stamp duty surcharge. 

Jonathan Hopper of Garrington Property Finders commented that “The extra stamp duty will add thousands of pounds to the upfront costs of buying a UK property. While the wealthiest foreign buyers are likely to take the extra hit in their stride, it may put off some of the speculative buyers who typically have a smaller budget.” 

Can Overseas Buyers Buy Property in the UK?

Foreign nationals and non-UK residents are able to purchase property within the UK. Typically, this is achieved through sourcing the appropriate mortgage funding through a specialist investing arm of a bank or provider. As can be expected the requirements are far more stringent when compared to those of UK residents, often demanding a larger deposit be placed.  

Can a Non-UK Resident Get a Buy to Let Mortgage?

Although non-UK residents are able to take out a buy to let mortgage, it is likely their mortgage provider will demand sufficient evidence of their income. The employment status and current income of the non-UK resident will be evaluated to determine the amount they are able to borrow with a buy to let mortgage. Whilst the specific terms and lending requirements will of course differ between providers, overseas investors will typically need to establish a UK bank account for the rental income to be paid into, and the mortgage repayments to be paid out of. Some foreign investors have commonly turned to private banks and lenders in order to fully finance their buy to let investment, however these lenders will often require those from overseas to provide a deposit of at least 25%, occasionally more.

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BrexitBuy-to-letForeign InvestorsInvestorsLoan-to-ValueLondonMortgageStamp DutyTips

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