One of the most popular investments for overseas buyers is property in the UK (United Kingdom). Not only is this type of investment stable, the investor often receives excellent returns. The most frequent foreign investors are from North America, China and the Middle East. There are also investors from across the globe. This is due to the resilience, pricing and growth of the UK market. Despite the political uncertainty and financial crises throughout the world, the performance of the UK continues to be admirable. This is important for overseas investors unable to find stability in the majority of areas throughout the world. If you are considering investing in property in the United Kingdom, there are several factors you need to consider. The tips below will help guide your investment.
1. Factoring in the Currency Exchange
In 2016, 28 percent of the investments made in property in the United Kingdom were from Asian investors. This was a seventeen percent increase from the previous year. This was partially due to the decision of the UK in June of 2016 to leave the (EU) European Union, resulting in a decrease in the value of sterling. According to the Office for National Statistics, the EU referendum occurred during the same period of time as the drop in the value of sterling and the increased response to other losses and gains. According to the Foreign Direct Investment (FDI) survey, this was a contributing factor for the £33 billion added to the FDI asset increase of £65 billion during the second quarter of 2016.
The majority of foreign investors pay for their purchases with cash. This means the drop in sterling value has been an enticement for investors interested in generating an income from purchasing United Kingdom property. Ever since the Brexit, investors from Hong Kong and China have continued to purchase UK property. The average annual spending since 2013 has been £2 billion per year.
2. The Importance of the Location
In order to be a successful investor, you must be aware of the performance of different areas throughout the UK. This is not always an easy task. London still remains the key choice for the majority of investors. This is due to the way London recovered from the 2008 crash. The prices have continued to increase ever since. This does not mean this is the best area for your investment. Sometimes, your best investment options involve looking at some of the other areas such as Liverpool, Manchester and Leeds. The properties here are often cheaper and highly desirable by potential tenants. One of the most important aspects of a good investment is considering the types of tenants you would be renting to and what they desire from their home.
The properties located on London’s commuter belt have also seen a resurgence. This is due to the number of investors looking for better value outside of London. This is an excellent strategy for taking advantage of the workers who are not interested in living in the capital. Another investment you should consider are the accommodations for students in the United Kingdom. There are a lot of investors with family members being educated in the UK. They are interested in purchasing accommodations for the student as opposed to renting. Many of these individuals are choosing a purpose-built property because they want their loved ones living in a safe environment. Some of these investors have lived in the UK in the past and have no problem paying for high-quality accommodations. These investors are part of the reason there has been a forty percent increase in property transactions for students during the past year.
3. Understanding Your Requirements for Purchasing Property in the UK
Once you understand exactly what is motivating your purchase, you will be able to choose the right property investment for your specific needs. The UK property market offers a wide range of investments including commercial properties and second homes. Understanding the options currently available will enable you to establish your budget and ensure your expectations are reasonable. You can generate strong returns for a rental property to establish a passive income, make an investment for your pension or diversify your portfolio. In many instances, the potential for capital growth is excellent.
4. The Legal Requirements and Taxes for the UK
The taxation on all properties in the United Kingdom is always changing and unique. If you are not familiar with the tax situation, you are not alone. You will need to understand the reasons you will be taxed to prevent an expensive mistake. You must factor in these charges to eliminate any surprises when you see your returns. Stamp Duty is important for investors purchasing property in the UK. The recent changes have imposed an additional three percent levy you need to be aware of. Investing in property overseas means it is extremely important to remain current on any changes in the market. This will prevent you from paying tax penalties because you have inadvertently broken the law. You have to remain current for both the second home and buy-to-let Stamp Duty tax bands.
Any individual who does not reside in the United Kingdom is classified as an overseas landlord. You may receive an exemption for your property in the UK by applying to the HMRC. Generally speaking, companies and individuals will have to pay taxes for any property located within the UK. This applies whether or not the company or individual is residing within the United Kingdom for tax purposes. The Non‑resident Landlords Scheme requires every tenant paying rent to a landlord not residing in the UK or the agent for this landlord to deduct taxes from rent paid at a rate of twenty percent. To help figure out how much you will owe for taxes, you can deduct any qualifying expenses. You will be required to provide the HMRC with this information every quarter for the taxes due on the rent you have received as a non-resident landlord.
5. Financing Your Investment in the UK Property Market
One of your most important considerations as an overseas investor is how your property purchase will be financed. A lot of foreign buyers entering the UK property market are choosing to make a cash offer. This provides them with the best opportunity to close the deal. It is also important to consider the other available options. You will find property available not only in the United Kingdom but all over the world in numerous different nations. Cash buyers are usually required to purchase an off-plan property. If your intention is to purchase the property by acquiring a mortgage, you should receive legal advice first. This will ensure all of your financial obligations are being considered.
The investors purchasing an off-plan investment usually find their payments are being spread out as the construction is being completed. This is especially important for overseas investors because there are countries placing restrictions on how much money can be moved to an overseas location by investors. Your best option is talking to the developer to make certain the transfer of your funds occurs over time. This will prevent you from inadvertently breaching your contract. Investments where your payments are favourably staged are very appealing when the country has stricter limitations on transferring your funds overseas.