UK property has a great deal of potential as an investment and it is easier to get into than you might think, with lower starting prices and plenty of benefits.
Read on to find out why UK property could be good for you.
There are multiple reasons why UK property just makes sense so I want to give you details of why you should look at investing. Property is popular for good reasons. Even now, in fact especially now, it offers great opportunity.
It is why I offer a range of well-vetted property investments to my clients as part of their overall financial planning. Getting it right matters.
- Fall in value in Sterling has reduced real prices
If you are paid in US Dollars, or a currency pegged to US Dollars such as UAE Dirhams, Saudi Riyals or Bahraini Dinars, you can buy UK property at prices that are significantly less than they were a year ago. At time of writing, your US Dollars or equivalent are worth some 13% more compared to Sterling than they were a year ago.
If your money is in a GCC currency or USD, this is a great time to lock in the benefits of the exchange rate. What this means is that UK property is effectively more than 12% cheaper for people paid in US Dollars, or similar, compared to 12 months ago.
Even if there are some short-term fluctuations, you have already benefitted from the start.
See HERE for the best way to send your money to Sterling, or for any currency transfers.
- Stability & legal protection
The UK is a mature and stable property market. The legal system and all the checks you go through as a buyer means you have a high level of protection.
The developer cannot just make myriad changes and you have a right to oppose any new buildings or changes in the area via the local authority planning departments. Owners and tenants have right that are fully upheld in law.
Both UK and foreign nationals have the same levels of legal protection.
While the UK market has some fluctuations in values, they are nothing like the boom and bust situations that are seen in other countries. There are good reasons why the UK is popular with foreign buyers and the very wealthy. As far as property is concerned, it is a low-risk jurisdiction.
- Huge undersupply so high demand
Land supply is finite and it is common knowledge that there is a huge undersupply of housing as the UK has simply not been building homes at a fast enough rate over recent years. This situation will be unchanged for years if not decades.
Property investment is about the income generated as well as the capital growth and due to the upfront costs, it is a medium to long-term investment. Property is a ‘buy and hold’ investment, and the short-term market fluctuations should be of no concern.
The days of people buying and flipping property are long gone but it is an important part of genuine diversification. And it works – if you get it right.
- The research has been done for you
The hardest part can be knowing where and what to buy. Emotion needs to be taken out of the equation and that’s where we come in. Objective opinions and genuine due diligence. Our people in the UK visit every single site personally, multiple times over the build period.
We work with a number of developers but do not accept every project for our clients. They need to be right.
Buying in areas that are on the up and where demand outstrips supply is always good logic. We only offer new developments, either brand new builds or refurbishments, as that means you get a property that doesn’t need maintenance for years and is top quality, commanding a good rental price.
The last thing you need as an overseas landlord is a place where you need to replace boilers, bring it up to current rental codes, deal with old plumbing etc.
All properties have 10-year warranties and are built to high specifications.
We select developments that are appealing and the focus is on areas with a high level of young professionals who have the income to be good tenants and want a quality apartment. It’s one of the reasons why many of the developments are in easy reach of university towns and major employers as that gives the landlord a good, captive audience.
See HERE for details of recommended developments in the right areas.
- Lower prices than you may think
The general value of residential property has increased across in UK over the years but there are still plenty of pockets of value. You can be a property investor for far less money than you might think.
You do not need huge sums of ready cash to start investing in property and start building a portfolio.
In most cases, as an expat you will need to have 25-35% as a cash deposit on exchange of contract, 28 days after agreeing a purchase, with the remainder payable on completion which can be anything from a few months to a year ahead. Mortgage finance is available.
This link has details of some of our recent options: FinancialUAE – UK property, latest options
- Income generating
As we are looking at rental property, you will receive a regular income. We are realistic about yields and research market comparisons.
Unlike certain companies, we do not offer income guarantees that impact on capital values, instead we have genuinely good investment property that is highly desirable.
All our developers have letting agents ready to find you good tenants so you can receive income as soon as the property is ready to move into.
This makes property a good investment to hold for the long-term so you have an income-producing asset in later years as part of your retirement income, alongside other investments and pensions.
We are seeing increases in rents and this will offset the increased interest rates on mortgages. (More on mortgages later.)
- UK Tax
UK rental income is taxable but even as a non-resident, you benefit from the Personal Allowance. This is the amount of income you can receive in the UK before you have to pay any tax and it currently stands at £12,570. If a property is jointly owned, you both have an allowance and certain expenses can be offset against the rent, reducing your taxable income.
The recent reduction in Stamp Duty in England, one of the few changes in the recent ‘fiscal event’ in September that has remained, increased the threshold from £125,000 to £250,000. This has immediately reduced the upfront cost but will likley fall in 2025 to take advantage now.
The Stamp Duty increases if you already have any property and all overseas buyers now pay a surcharge of 2%, which started in April 2021. Even so, it is still less than it was a few months ago. For all interested parties, I will work out the amount payable so you are fully aware of total costs.
There is also an option to buy property within a limited company which can reduce tax liabilities and I can advise on this and also introduce you contacts who can handle annual tax returns, if required.
- Capital Growth
Good investments make money and will grow over time and UK property does just that. As we are talking about long-term investing, what happen in the next few years should not be a concern, as you won’t be selling it, and will continue to receive rental income.
Looking at short-term returns is not the way to go. We are talking about proper financial planning. Long-term, sensible planning for your financial future.
According to a survey published by Rightmove in February 2022, average house prices across the whole of Great Britain increased by 53% over the previous decade, from £222,989 up to £341,019. Increases varied from just 6.2% in Middlesborough up to Margate in Kent which saw a whopping increase of 102%.
Clearly, the increases are not the same across the country but that is why it is important to buy in the right places, where there is demand for quality property and will continue to be in the future. That’s why our research is so valuable.
The recent Savill’s report – a publication with a great deal of credibility and a track record of getting it right – is predicting an increase in capital values of 23% over the next five years. The story is not the same across the UK, and there are areas where we expect to see more than that.
- Mortgages & other advice
I offer a full service so this includes some advice on costs, taxes and on mortgages. I work with an excellent mortgage broker who specialises in assisting expats. The average ‘high street’ lender cannot assist but we have plenty of options for both variable and fixed rate mortgage and interestingly, we are even seeing slight reductions in fixed rates.
Islamic finance is also available.
This article maybe of interest: Fixed rate mortgages in a volatile economy
There is no set formula but we should all have a combination of cash, property and equities. We just need a discussion to see what works best for you.
Once you own property, you need to organise a UK will and that is another service I offer to expats, in conjunction with a legal practice. We can do the life cover too, as well as considering other aspects of your financial planning, if required.
I see a lot of naysayers, claiming there will be big falls in prices but the economic fundamentals are better than the media is saying and newspapers need dramatic headlines to get people reading. All properties and areas are not equal.
Real advice is given, based on your circumstances, just like with my general personal financial planning.
To arrange a discussion on investing in UK property, or any aspect of your personal financial planning, please email me at email@example.com
Meetings over Zoom for your convenience.
I write articles such as this one as part of the holistic personal financial planning service and that I provide to expats, and the general consumer, financial and legal information that I provide in The National newspaper, in other media, and on the Facebook group British Expats Dubai.
Please take a look at the other useful articles on this website.
Currency table from XE.com