Why overseas investors are cashing in on property UK
Overseas investors in property UK have had a lot of success in the past. It is especially true of those who have invested in London off-plan property. Moves to try to kerb foreign investment into the UK property market have done little to deter investors.
In this article, I’ll discuss the five primary reasons my team at Gladfish are receiving increasing numbers of enquiries from overseas investors.
Politics provide a property investment boost for overseas investors in property UK
There weren’t too many people this time last year who would have predicted that the UK electorate would vote to divorce from the EU. But, however big a surprise the Brexit vote was, there is no doubt it’s created a golden opportunity for overseas investors. I’m not sure I’ve witnessed a better chance to buy in the best places to invest in property UK at an exceptional value.
I’ve even heard some say it’s put UK property prices into the bargain category. Why? Because a political decision created a market which has temporarily lost sight of the fundamental nature of the UK economy.
Here are the five reasons why overseas investors are so keen on property UK right now:
The weaker pound means UK residential property prices are down 20% in foreign currency
Ahead of the EU Referendum, it cost around €1.40 to buy £1. A £300,000 property would cost an investor from Europe around €420,000. Almost overnight, UK property was marked down by 20% in euro terms. With the euro now worth about €1.16 to £1, that £300,000 property costs less than €350,000. Dollar investors have benefited in the same way.
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UK property just became a lot more affordable for overseas investors.
UK property price rises have slowed
This time last year, UK residential property was in high demand. Investors were rushing to get purchases completed before new stamp duty rules came into force. It added an extra 3% to the cost of most investment properties.
After the beginning of the new tax year in April 2016, most of the demand that would have surfaced during the following three or even six months had been fulfilled. Transaction levels fell. Domestic demand suffered through scaremongering after the Brexit vote. Some experts warned of a fall of up to 30% in property values. They couldn’t have been further off the mark.
Yes, the rate of property price increases has fallen in the UK, but prices are still around 4.3% higher today than they were a year ago. Add the average rental yield of 5.1%, and you’ve got a total annual gross return of 9.1%.
The UK property market is a buy-to-let investor’s dream
Rental rates in the UK are rising. According to the HomeLet Rental Index, the average UK rental value was £888 per month in December 2016 (0.7% up on a year earlier). In London, the average rent was measured at £1,497 per month.
There’s a massive undersupply of homes in the UK. It’s estimated that to meet the shortfall, developers would need to build between 50,000 and 100,000 extra homes every year.
More people are renting now than ever before, unable to buy their home because of affordability or lack of supply. By 2025, there could be 7.4 million households renting in the private sector. That’s 1.8 million more than the 5.4 million households that are renting today.
It looks likely that demand from home buyers, investors and renters will underpin the market for at least another decade. Property prices should rise, and rents should push higher.
Mortgage rates are at record lows
After the Brexit vote, the Bank of England cut the base rate to its lowest ever level. Mortgage rates are now as low as they’ve ever been. Some new mortgage deals could skyrocket property investment profits.
Tax-free income for overseas investors
As an overseas investor, you could get tax-free income from your rental. You’re allowed to deduct costs from your income. For most overseas investors, you’ll be able to claim the UK personal tax allowance before paying income tax. Currently, you may be able to receive £11,000 net rental income without paying income tax. For a couple investing, you can each claim that tax allowance – so you might be able to earn £22,000 for you, without paying tax. (Different countries have different rules, so you should also speak to your tax authority.)
Read our blogs about UK property for overseas investors:
Do you know that expats can earn tax-free rental income from the UK?
Property investment UK – How are non-residents taxed?
How can you profit from investment in property UK?
We’ve helped hundreds of expats and overseas investors achieve their lifestyle goals through investment in UK property. Contact one of our team today on +44 (0)207 923 6100, and you’ll have taken the first step to doing the same. Just because you live in Spain, or Greece, Singapore, or Australia, there is no reason why you shouldn’t benefit from UK property investment, and the great property fundamentals that underpin it.
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