If you’re interested in buying UK property from overseas, then you’ve come to the right place!
At Mistoria Group, we have accumulated years of experience operating in the UK property investment market. This allows us to guide our clients with informed advice and provide unmatched customer support for both UK residents as well as overseas investors.
For guidance regarding obtaining a mortgage for non-UK residents, or the tax implications that come with owning a property abroad, the property experts at Mistoria Group can help.
This ultimate guide for non-UK residents is packed with helpful information to support overseas investors interested in UK property and answers the frequently asked questions surrounding buying property as a non-UK resident.
What is meant by an overseas investment property?
An overseas investment property refers to a property abroad that is acquired as an investment.
It could be used as a holiday home or buy-to-let property, for example, with a view to generating a constant stream of revenue.
By purchasing a property from overseas, an investor can pick and choose the best hotspots to increase their ROI (Return on Investment).
Can you invest in the UK if you live abroad?
Can non-residents buy property in the UK? Yes, foreign investors can invest in UK property even if you live abroad.
However, it’s worth noting that this process is typically longer and more complex than it is for a UK resident purchasing a property here. Some hurdles non-UK residents might come across with overseas property investment in the UK include more stringent requirements, higher interest rates, larger deposits, and more paperwork.
Not to mention, there are also rules and legalities to contend with, so it’s essential you do your research first or discuss your investment desires with a professional property investment team.
Buying a UK property as a foreign investor can come with plenty of advantages.
Below, we find out why the UK is seen as such an attractive destination for overseas investors.
Why is the UK an attractive destination for overseas investors?
As one of the leading business locations in the world and from a position among the planet’s major trading nations, the United Kingdom has a reliable, rich and diverse market that is attractive for investors and businesses alike.
The UK also boasts a thriving population of more than 67 million people, making it a major and popular market in its own right – one that investors shouldn’t ignore.
Concerned that Brexit has affected the appeal of the UK to overseas investors? While it’s true that the UK was previously seen as a particularly attractive country to invest in as a result of its EU membership (which made it a gateway into the European market), it still remains a desirable destination for overseas investors, but why?
According to data obtained by the Mergers and Acquisitions Research Centre (The Business School, University of London), despite Brexit, the UK’s subsequent departure from the EU hasn’t affected its appeal as a sovereign state.
At the time, this was mainly due to the low interest rates and the favourable currency exchange rate (that followed the weakening of the pound).
However, it’s worth noting the UK’s interest rates will naturally fluctuate in response to political and financial events that occur both in the UK and further afield.
Benefits of UK property investments as a non-UK resident
If you’re a non-UK resident and are keen to invest in UK property, then you might be wondering what’s in it for you.
If this sounds like you, or you’d like to find out more about the advantages that come with purchasing UK property right now, then please don’t hesitate to give us a call or take a look at the three main benefits of this type of property investment below.
History of long-term property price rises
Based on data from Land Registry’s UK House Price Index, the average house price in the UK stands at a substantial £292,118 (as of July 2022), having risen by 15.5 per cent compared to the previous year. These significant UK property prices are a result of increasing prices at a national level since 2011.
According to research conducted by Yes Homebuyers, these prices have been increasing at a significant average rate of 4.3 per cent each year – some of the fastest rates ever seen.
While economic and political instability can create uncertainty and unrest, the housing market is famously stable. In part, this is because it’s a physical asset that tends to grow in value over time – unlike many other sectors of the UK economy.
Great ROI rates
If you want to purchase UK property with a view to letting it in the future (a buy-to-let), then you’re likely to benefit from the relatively low interest rates, strong rental demand, and guaranteed source of stable income.
Often, this means investors (regardless of whether they are UK residents or foreign investors) will be able to benefit from a great ROI of anywhere between five and 12 per cent every year.
While your ROI will always vary according to current interest rates (rates that are always subject to change of course), you can try to maximise your returns by purchasing a UK property at the right time in a fantastic location.
Doing your research on the surrounding area and looking out for essential facilities and amenities (like universities, schools, hospitals, supermarkets, libraries and leisure centres) can make the property even more desirable for prospective tenants.
Currency exchange rate
An additional (recent!) advantage for foreign investors searching for property in the UK is the favourable currency exchange rate and the pound’s (GBP) reduction in value, being nearly 1 to 1 against the euro (EUR).
While the falling value of the GBP spells uncertainty for much of the UK and overseas investors may be dissuaded by this initially alarming unrest, they are actually in the best position to capitalise.
This is because the decreased valuation of the GBP provides a fantastic opportunity for overseas investors to secure a UK property that will maximise their investment as the exchange rate will be in their currencies’ favour.
This means that, unlike the past, currencies including the euro and the dollar will be worth more than the pound, making UK property investments cheaper than usual.
What are the property tax implications in the UK for overseas investors?
One of the most important implications of owning property abroad is the tax implications in the UK – most notably, Capital Gains Tax (CGT).
This is a tax that all foreign owners of UK residential property must pay – regardless of whether the property is purchased and used by an individual, a trust or a company.
The amount of CGT that’s owed for a residential property is different to other assets because it’s calculated using a different rate of tax on gains. To calculate the amount of CGT the foreign owner must pay, the increase in the value of the property, also referred to as ‘capital gain’, must be taken into consideration.
According to official Government advice, the amount of CGT also varies based on your UK income and subsequently how much income tax you pay (basic, greater or higher). The CGT rate for individuals therefore varies between 18 and 28 per cent, while trustees can expect a rate of 28 per cent and companies a rate of 20 per cent.
However, it’s worth noting that overseas investors can claim CGT relief if the property is occupied and is their main residence. In order for the UK property to be classed as their ‘main residence’, however, the foreign investor must live in the property for at least 90 days in a single tax year.
While this approach ensures that the overseas investor is exempt from CGT, the individual will be at risk of becoming a UK tax resident which can result in additional costs.
If you’re feeling anxious or concerned about the amount of CGT you could be asked to pay, you can find reassurance in these reliefs and exemptions.
While investing in UK property is still considered to be an attractive proposition for the vast majority of non-UK residents, each is considered on a case-by-case basis, so it is always best to seek out professional advice.
Mortgages for foreign nationals investing in the UK
Unfortunately, we don’t all have hundreds of thousands of pounds, euros or dollars in the bank ready to snap up a property when the right one comes along.
Instead, a mortgage is often the only way to pick up a property – regardless of whether you’re a UK or non-UK resident. The vast majority of foreign nationals hoping to invest in UK property will therefore need to know how they can obtain a mortgage in the UK.
However, before we dive straight into how a foreign national might obtain a UK mortgage, it’s important to first clarify the definition of a foreign national – a term that refers to any person who is not a national or citizen of a specific country.
It’s also important to note that a foreign national can reside in the country they wish to purchase a property in or abroad, but they’ll still be classed as a foreign national.
Just like a UK resident hoping to purchase a UK property, a foreign national that wants to invest in UK property, will need to legally apply for a mortgage.
Luckily, there is an ever-increasing number of mortgage lenders and private lenders that either specialise in providing foreign national investors with mortgages or are willing to offer them.
Private lenders, in particular, don’t have restrictions to contend with, which allows them to open up their mortgage offers to foreign investors interested in buying UK property from overseas.
It’s worth remembering, however, that all mortgages are a loan and are therefore subject to both credit approval and will come with interest rates that can change daily and without notice.
If you meet the below criteria, then you’ll need a foreign national mortgage:
• You are a non-UK resident or don’t live permanently in the UK
• You were born outside of the EU but can remain indefinitely or have permanent residency
• In some cases, those born inside the EU will also need a foreign mortgage
How to find the right investment property for you
If you’re new to property investment, or are in the market for a new property to add to your growing portfolio, it’s important to find the right opportunity for you. To do this, there are several aspects of property investment that you’ll need to consider.
This includes the location of the property, the type of investment (student, buy-to-let, etc.) you’re interested in, and the degree of required tenant management, to name just a few important aspects.
For support with finding the perfect UK pad, it’s therefore often best to consult the professionals who can whittle down your options to the most suitable property investments that meet your specific requirements!
Why choose Mistoria Group for UK property investment?
It’s no secret that investing in UK property is a big decision – no matter whether you’re a UK resident or an overseas investor.
Luckily, Mistoria Group has more than 100 years of invaluable experience in the property investment industry, specialising in everything from armchair and joint venture investment to merchant investment.
Not only do we have substantial local knowledge of the property market in the North West, but we can help you to source properties from across the length and breadth of the UK.
Not to mention, once you’ve found the ideal investment to add to your property portfolio, we can take care of everything else including tenant management and taxation, so why not get in touch today?
Start your UK investment venture with Mistoria Group
Ready to make your first UK property investment? Here at Mistoria Group, our expert team of professional estate agents, chartered accountants and property investment specialists that can provide detailed investment guidance and advice.
Regardless of whether you’re buying property as a non-UK resident or you want to find out more about the tax implications of owning property aboard, we’re here to help.
If you’re keen to know more about investing in UK property from overseas or would like to get in touch with our team, feel free to give us a call on 0800 500 3015 or send us an email using firstname.lastname@example.org.
Our online contact form can also be used to submit your enquiry, but no matter how you choose to get in contact, you can be confident that our team will get in touch with you shortly to find out more about your property investment enquiry or requirements.