Foreign ownership of homes in England and Wales has reportedly nearly tripled over the past decade, as wealthy investors eye the UK’s coveted property portfolio.
Nearly 250,000 homes in England and Wales have been registered with overseas-based buyers, a figure which has swelled from fewer than 88,000 homes in 2010, according to the Consumer Financial Protection Bureau (CFPD).
Buyers were spread across 20 different countries with individuals from South East Asia and the Middle East especially active. With house prices continuing to rise, the UK property market continues to provide attractive investment opportunities.
London has traditionally been targeted by non-residents looking to invest. Despite London’s price growth being at a 13-year low, the average property price has increased by 67 per cent since 2010.
However, the focus is evolving as non-residents look for alternative British cities to invest in. Large scale developments in cities such as Birmingham, Liverpool, Manchester and Leeds have significantly increased non-resident ownership in these areas with attractive yields available.
When individuals are looking to purchase UK property from overseas, there are some key things to consider:
Firstly, location remains critically important with considerations around transport, future investment and development, and the potential for this to drive capital appreciation.
Secondly, property type is a vital factor, paying particular attention to matters such as cladding and the remaining years left on a lease. Buyers are asking themselves important questions like how the transaction will be funded; will finance from an international bank be required? What are the likely fees and costs to consider?
Thirdly, non-residents are taking time to select appropriate professional advice. They want to keep it simple, staying clear on investment objectives and remaining focused on these goals throughout the purchasing decision.
Brokers also have a lot to think about when choosing lenders to work with when selling to overseas buyers, such as maintaining high levels of due diligence, given various regulatory developments over recent years. For example, Know Your Customer criteria can vary. Additionally, clients have to provide higher deposits, typically 25 to 50 per cent, depending on the client’s circumstances. Most lenders also require an account to be opened alongside the mortgage to facilitate the monthly payments and receive rental income for buy-to-let properties.
There have been significant political and economic changes that could impact overseas buyers over the coming years: The introduction of the two per cent stamp duty surcharge from 1 April 2021 and a register to identify overseas property owners. Then, in January 2021, there were changes to the visa application process for British National Overseas (BNO) passport owners in Hong Kong.
So far, 2022 has seen continued interest from foreign buyers. As interest rates and political pressure to regulate or restrict purchases from foreign investors remain low, this trend to buy UK property is likely to continue for the foreseeable future.