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The UK property market: a guide for overseas investors

Dec 3, 2018

Overseas investors are welcomed with open arms here in the UK. However, it can be complex enough buying a property at home, let alone in a foreign country, without professional guidance. 

In this article, we’ll try to explain the benefits that lie in store, including:

What’s so special about UK property?

Everybody is aware that the UK is a small country in terms of actual land; what many don’t realise is that, with a population of more than 65 million, it’s one of the world’s most densely populated nations too.

It also turns out to be the world’s 4thlargest property market, with around 25 million homes and 2 million business premises.

We’re fiercely defensive of our heritage and landscape. So much of Britain enjoys protected status at one level or another that there isn’t a lot of it left to convert or build on from scratch.

The Royal Institution of Chartered Surveyors (RICS) is predicting that the current housing shortage is set to get worse, with at least 1 million new homes desperately needed by 2024.

Even in the times of plentiful supply, UK property prices were reckoned to roughly double every decade; the prospects for capital growth in today’s circumstances are every bit as positive.

RICS also forecast that 7.2 million households will be living in rental accommodation by 2025. Naturally, tenant demand is on the increase, bringing with it longer-term tenancy agreements and consequently better rental revenues.

How is it investor-friendly?

Firstly, the UK is stable – both politically and economically.

As one of the world’s oldest modern democracies, it has to a great extent historically relied on the private sector and so is more conscious and protective than most of the importance of investor security.

On the world stage, the UK is still a major player.

Its economy ranks in the global top 10, it’s one of the 5 permanent members of the UN Security Council, it’s a founder member of NATO and is a G8 nation.

Brexit will not have a significant effect on the UK’s global influence which supports its market protection and fertile investment landscape.

Uncomplicated real estate law

The UK also offers one of the world’s most transparent legal systems with no culture of corruption.

Our property legislation is relatively straightforward, with clear ownership laws, simple property registration processes and favourable tax structures.

Property sector professionals such as solicitors and surveyors need a formal qualification and are regulated by officially recognised trade bodies, whilst estate agents are bound by the Estate Agents Act of 1979. Any disputes between buyer, seller or agent are resolved by the independent and impartial Property Ombudsman.

Investors – welcome to the UK

Many countries adopt a deliberate policy of obstructing foreign property investment – some go so far as to ban it.

The UK doesn’t impose any restrictions at all. Investors of all nationalities are perfectly entitled to own one or more UK properties, both in the residential and commercial sectors.

Crucially, there is no need to have a UK residential qualification, provided you can satisfy certain other criteria.

This means that not only does the world at large enjoy unfettered access to UK property, its rental yields and capital growth potential, it can also benefit from a revenue stream in another currency.

The last few years have made the pound sterling exceptional value overseas, and a sterling bank account will enable you to exploit the exchange rate to your best advantage.

Cash or mortgage?

As always, a cash purchase will prove much more straightforward. You will still have to provide documentation such as proof of identity and domicile, and you will have to comply with UK money-laundering checks – but then so does everybody.

Once the sale has gone through, however, you will be entitled to receive your income exactly according to your contract into the bank account of your choice – although, as mentioned above, it will make sense for you to open one here in the UK.

Think about a broker

If you want to take out a UK mortgage you’ll have to provide documentary evidence that you can keep up the repayments. Unsurprisingly, terms may be slightly stricter or interest rates higher – but the UK mortgage business is very competitive, so it’s well worth shopping around.

It will almost certainly be worth your while consulting with a specialist mortgage broker – they are legally bound to place your interests first and explain in detail any recommendation they may make.

A bank, on the other hand, need only satisfy itself that you can service the loan – whether it’s the best option for you and your personal situation may later prove to be debatable.

If you don’t have a credit record within the UK, finding a mortgage may prove complex. However, a ‘non-status’ or ‘self-certification’ mortgage allows you to take out a mortgage by confirming, in writing, that you can afford the repayments; you will also need to provide a higher deposit than usual.

Before you embark on the purchase process, your developer or real estate agent should be able to put you in touch with legal and financial advisors who will explain everything and set you on the right path.

Management you can trust – and forget

Obviously, you won’t want any involvement in the day-to-day operations of an investment property overseas – time zones and mileage prohibit it.

If you’re interested in owning a traditional residential buy-to-let property, a local estate agent should be able to put you in touch with a local management company.

The downside of this is that your property will be just one of many that they handle; they aren’t onsite and you’ll have to wait your turn – they have no incentive to go that extra mile.

Then, if it turns out that the issue is something significant like a broken boiler, you will have to authorise its replacement – and pay for it, a process which will cost you time and money and will seriously inconvenience your tenants.

But if you’re buying a specialist investment property, it should all be taken care of for you.

Multi-unit properties such as:

  • Purpose-built buy-to-let apartments
  • Furnished Holiday Lets
  • Serviced apartments
  • Student accommodation
  • Care homes

should all come with management contracts as part of your purchase contract.  All costs, even the unforeseen ones, will be included so nobody will ever need to contact you.

Some properties offer state of the art management systems with real-time online performance tracking; others provide an onsite management presence 24/7.

In either case, you need never concern yourself with any operational aspect of your property – including letting, rent collection, marketing and maintenance.

Your income will be entirely passive, with no input required from you at any time.

Choose an experienced partner

The more you can delegate to a trusted partner, the easier your UK property ownership journey will be.

With offices in London and Dubai, we have thousands of active clients all over the world who we have been able to help successfully select, buy, run and resell UK property.

We and our specialist partners are ready to assist you every step of the way.

Next steps

The first thing to do is to look at a highly successful mixed property portfolio to familiarise yourself with what goes to make a rewarding property investment.

After that, you’re bound to have a few questions as a newcomer to the UK property market, so it will help if you speak to an expert. Just have an informal chat; it will give you the chance to get your options quite clear in your mind, with no obligation whatsoever.

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