• How to Buy Property in the UK: A Complete Guide

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    Suggestion: Watch the 5 minutes video tutorial before reading this article

    Some people predict that property investments from Asian buyers will decline in the UK, due to the current turbulence in the market. But reality shows something else.

    To me, it’s not surprising why many Asians continue to invest in the UK. The country is a perfect place for Asians to find quality education, and I’m not only talking about the bigger cities, like London.

    If you plan to let your children reside in the UK for a longer period of time, or reside there yourself, you should jump on the property train earliest possible.

    Topics covered in this article:

    buy-property-united-kingdom

    Can foreigners buy property in the UK?

    Asian investors have no restrictions to purchase and to get full freehold ownership of property in the UK.

    The UK is and has been the first choice for many Asians, especially from Hong Kong, Singapore, and Mainland China, as they look for a stable place to store their assets.

    At the same time, while people from the UK buy much property in places like Spain, Asian investors often look for English speaking countries and where their children can study in the future.

    Overall, the buying process is simple and there’s no need to open a local limited company, or to setup complex contractual agreements with UK citizens.

    Can foreigners buy land in the UK?

    You’re not required to have a UK citizenship to buy and own land, like in many developing countries, such as the Philippines or Cambodia.

    This is similar to other countries in Europe, which gives you plenty of more options, and not just condos that foreigners so much like in Asian countries.

    UK’s property market

    If you have assets of, let’s say GBP 200,000, you will have difficulties to find a spacy apartment in London and you’ll need to look for a property in the outskirts.

    Reports say that investors will not be able to find a London property below GBP 200,000 by 2019, so if you plan to buy a property in London with this budget you need to act fast.

    On the other hand, you can find lucrative deals in smaller cities like Sheffield, where they also have universities with high quality education.

    A British friend of mine recently purchased a property close to The University of Sheffield for a price of a little more than GBP 100,000.

    His expected monthly rental income is set to GBD 725, a great income cash flow compared to what he paid.

    Asians who let their children go to the UK for studies don’t turn down these kind of offers, if the property is located in a safe area close to a university and public transportation.

    For them, it’s worth paying a couple of extra pennies for higher security and convenience.

    London’s property market has stagnated, so you better look for other cities, more about that later in this article.

    The British Pound has depreciated significantly since the announcement of the Brexit, as such, a purchase will set you back less money.

    What should I consider before buying property in the UK as a foreign non-resident?

    There are some questions you should ask yourself before you decide to invest in the UK.

    • What is your budget? Should you invest in several properties, or only one? Sometimes, several properties can bring you higher rental incomes compared to just one property.
    • If you don’t live in my property on a continuous basis, can someone else maintain it for you? What will the costs be?
    • How much can you earn in rental income if you buy to let? You can learn this by checking what other people charge in the area, check Airbnb, and call a local agency.
    • How much can you expect that the property appreciate in value? Look for reports and property forecasts. Here, you can also call a local agency to get important information.
    • How has the GBP performed compared to your own national currency? What is the expected performance of the GBP in the coming years?

    A weak GBP might be preferable when I purchase the property and when I’m hiring people to maintain my property. But a weak currency might also reduce my rental incomes.

    Why do you want to buy property in the UK?

    Two important questions you need to ask yourself are:

    • Which cities and areas will grow the most in the coming years?
    • Which cities have good universities that are suitable for my children? (Comparing both enrollment requirements and tuition fees)
    • What are your incentives to invest in the UK market? If you simply plan to store some of your assets, plan for your children’s education, or seek maximum yields, your choice might differ.

    Even if London’s property market has stagnated, many Asian investors still decide to buy London property, mainly due to tradition and a belief that prices will continue to increase over the long run.

    Process when buying property in the UK

    It’s important that you understand the complete buying process, before engaging in UK’s property market. Below, I’ve listed the steps involved when buying UK property.

    1. Property investment plan

    Two to three investments in a smaller city can easily sum up to one property investment in London.

    And it’s generally better to buy a multiple amount of smaller units compared to a bigger one, considering incomes from rentals, for example.

    If you want the property to increase as much in value as possible, the location will have a big impact too. Asians continue to pour money into London and the prices are reaching record breaking levels, year after year.

    2. Finding a real estate agent in UK

    There’s a big supply of real estate agents in the UK and it can be a daunting task to find the right one.

    You can also find companies that offer tailor suited services, including everything from property sourcing, tenant screening, and property sales.

    Checklist when looking for UK real estate agents
    • Check that the agent is a member of the NAEA (National Association of Estate Agents). They can answer to questions and check whether an agent is licensed or not.
    • Check their website and see if it looks representable. Do they have any testimonials or case studies? By having a website, I don’t need that they shouldn’t have any physical office in the area where you plan to buy.

      It’s important that they have easy access and a well rounded knowledge about the area where you plan to invest

    • Ask friends, relatives and acquaintances if possible and see what experiences or recommendations they have
    • Is the agency responding to your emails timely? Do they pick up when you try to call them? These are important items paying attention to.

    What should I ask my real estate agent?

    Some questions you should ask your agent are:

    • For how long time has the property been listed?
    • Are there any liens or encumbrances attached to the property?
    • When was the last pest and building inspection?
    • How much can I expect in rental yields?
    • Will you help me to find tenants and manage all communication with them?

    If you are not able to check the property on site in the UK, check with a friend or acquaintance and let them check it on behalf of you if possible.

    3. Getting a mortgage as a non-resident foreigner in UK

    Foreign investors (non-residents) can unfortunately not get a mortgage in the UK.

    The reason is that foreigners don’t have any credit record. To get a UK mortgage, you need to meet the following criteria:

    • You must have been a resident for at least 3 years
    • You need to have a local job
    • You need to have a liquid private asset with a value of at least 25% of the property price
    • You need to open a UK bank account

    4. Placing an offer on your property

    united-kingdom-property

    When it’s time to come up with an offer on your property, you need to do thorough preparations beforehand.

    If you can pay for the property with cash directly, without a mortgage, you might be able to offer a lower price, as the buying process will be faster.

    Benefits with distressed sellers

    You can also try to find distressed sellers that want to sell their property fast and therefore accept a lower price. Many people face situations in life when they need to get rid of a property fast.

    A distressed seller might have financial issues, is going through a divorce, or have lost his or her job. Don’t think that you are taking advantage of the seller’s life situation, but rather that you’re helping the person in bad times.

    You can ask your agency if they have more background information about the seller and whether he or she wants to sell the property fast.

    If you buy the property without the help from an agency (which I don’t recommend), you can ask the seller directly over the phone.

    Before you come up with an offer, check what other properties have been sold for in the neighborhood.

    Should I visit the UK before I purchase my property as a non-resident?

    You can find both minor and major defects on the property, that you can fix yourself and after the purchase. But these defects can also help you to negotiate on the price.

    That’s why I recommend that you visit the UK in person to inspect the property prior to the purchase.

    A flight ticket of GBP 500 – 1,000 might be negligible compared to the amount of money you save for one or more defects on the property.

    5. Getting a survey of your UK property

    When the seller accepts your offer, you’ll need to do a survey on the property, to confirm that there are no issues you weren’t aware about before the offer was made.

    The survey will find out if there are any problems with the property, such as, if there are any liens or physical damages you didn’t know about.

    If there are problems with the property, be sure to sort them out quickly.

    You can request the seller to fix the problems within a certain time frame, or renegotiate the price, in case you and the seller prefer it that way.

    Sometimes, buyers want to pull out from the deals in case the problems are too serious.

    After you’ve made your offer, be sure to contact your bank (if they provide you with a mortgage) as they will need to inspect the property and make a valuation.

    6. Finding a property lawyer in the UK

    You’ll need to find a property lawyer, to help you with contractual matters and to transfer the property in your name.

    The lawyer, sometimes referred to as solicitors, will also handle all the contact with the seller’s side and review documentation.

    The major difference between a solicitor and a conveyancer is that a solicitor has a wider knowledge in law, while a conveyancer is more focused on property. Often, a conveyancer is cheaper to hire compared to a solicitor.

    You’ll need to contact a conveyancer or solicitor after you’ve placed an offer on the property and before the property can be transferred in your name.

    Before you choose a solicitor or conveyancer, confirm that they have a license and do some research to understand if they are reputable or not, that can be done on the internet.

    Give them a call beforehand and ask some questions to confirm their seriousness.

    What should I ask my solicitor?

    Some questions you can ask the solicitor are:

    • Do you have a license and are you legally qualified to help me?
    • Which costs do I need to pay for when hiring you as my solicitor/conveyancer?
    • Will you manage all the communication with the seller’s side?
    • How often will you keep me updated in the process when I buy my property?

    It can be good to start looking for a solicitor or conveyancer as early as possible, to make sure you have sufficient time to find a serious one.

    7. Transfer of property ownership (conveyancing) in UK

    When the seller accepts your offer, he or she will need to prepare a contract for the transfer of the property. The contract should include all necessary information about the property, such as:

    • If there are any liens on the properties
    • If there are any encumbrances
    • What the sales price is
    • Physical information regarding the property, such as boundaries

    london-property

    Your solicitor or conveyancer will help you to sort out any questions and contractual matters with the seller’s conveyancer or solicitor.

    When the contract is agreed between both you and the seller, you can sign the contract and start to prepare the transfer of the property.

    Finally, the final payment will be made to the seller and you’ll receive the documents for the transfer of the property. The seller gives you the keys on the date agreed in the contract, you are now the owner of the property.

    Property taxes in UK

    Below, you’ll find the property taxes you need to pay as a non-resident foreigner buying UK property.

    Stamp Duty Land Tax (SDLT)

    The stamp duty and taxes are for foreigners and UK nationals, which is preferable of course.

    The Stamp Duty Land Tax (SDLT) is applied for property purchases of GBP 125,000 or above. The rates are as follows:

    • Up to GBP 125,000 = 0%
    • Between GBP 125,000 – 250,000= 2%
    • Between GBP 250,001 – 925,000 = 5%
    • Between GBP 925,001 – 1,500,000 = 10%
    • Above GBP 1,500,000 = 12%

    Beware that in case your property costs more than GBP 1,500,000, it doesn’t mean that you need to pay 12% of the total price, the rates are applied one after another.

    I recommend you to visit the UK government’s website that has a very useful tool, that can help you to calculate the SDLT.

    Stamp Duty Land Tax (SDLT)

    Since 2016, there’s also an additional SDLT to be added in case you buy your property as a second home. The additional rate is 3% and added on top of the stamp duty rates listed above.

    That means, if you already own a property abroad the following rates apply:

    • Up to GBP 125,000 = 3%
    • Between GBP 125,000 – 250,000= 5%
    • Between GBP 250,001 – 925,000 = 8%
    • Between GBP 925,001 – 1,500,000 = 13%
    • Above GBP 1,500,000 = 15%

    Capital Gains Tax (CGT)

    In addition to the stamp duty, you also need to pay a Capital Gains Tax, in case the property has increased in value, which it probably has.

    But there a few exceptions. You can ignore the Capital Gains Tax in case:

    • You’ve used the property as your main residence, during the time of ownership
    • You’ve not used parts of the property for business, or let anyone else used parts of it for business purposes
    • The area of the ground is less than 5,000 sqm

    Can I reduce my taxable amount by deducting costs when buying property?

    Before the capital gains tax is charged, you can deduct the stamp duty, legal fees, and agent’s fees, among others.

    And bear in mind that it’s not applied to an amount of up to GBP 11,300 (a so called capital gains tax allowance).

    Can foreigners get a residence permit or a visa if they buy property in the UK?

    Unfortunately, you will not be able to get a residence permit or permanent visa if you buy a property in the UK.

    This applies also to many other countries, even in developing countries such as Cambodia.

    Where should I buy property in the UK?

    Many Asians still look for investments in London due to tradition, and their belief that it’s a never failing market.

    This is common in other countries, like Canada, where Asian investors have chosen Toronto, Vancouver or Ottawa for property investments.

    But London is getting expensive.

    Reports show that no London properties will be for sale below GBP 200,000 until 2019. Thus, my suggestion is that you look elsewhere unless you and your children have a strong desire to go there.

    Sure, London is a top ranked university city, in fact, it was ranked the 3rd best university city in the world recently. But the market is stagnating and there are better opportunities elsewhere.

    Instead of putting all your focus on London, you should have a glimpse at cities close to London, the Midlands and in the Northern parts of the UK.

    Some of these cities are: Manchester, Yorkshire, Cambridge, Sheffield, and Birmingham.

    All these cities have great well-known universities with tuition fees and admission requirements that are way lower compared to London.

    Buying property in Birmingham

    Birmingham has 2.5 million people and was recently ranked as the city with the highest potentials, in terms of property investment in the UK. Here, the property market is not as stagnated as in London, it has a great nightlife and a lot of job opportunities (especially in the Automotive industry).

    Birmingham might well be a place where your children can stay long term after they’ve graduated from the University of Birmingham, which is ranked in the top 50’s worldwide.

    Buying property in Sheffield

    Sheffield is a cozy university city with a median property price of around GBP 70,000. The monthly medial rental income, on the other hand, is around GBP 650.

    That’s just great!

    The University of Sheffield is a great university with a current world ranking at 82.

    Buying property in Manchester

    Manchester is considered as one of the most interesting places to invest in property in the coming years. The city has two of the best football teams in the world, great universities, a huge student community, and offers great job opportunities after graduation.

    The property prices are still fairly low and Manchester will receive a lot of investment in infrastructure in the coming years. As such, I can’t leave Manchester out of this list.

    FAQ

    How long time does it take to buy a house in the UK?

    It really depends. But I’d say that you should set aside at least 6 months for the purchase.

    Can I buy a house in America if I live in the UK?

    Yes, you have no particular issues to buy a house in the US if you live in the UK. But you’ll need to get an Individual Taxpayer Identification Number (ITIN) first.

    How much do I need to buy a house UK?

    It depends. In London, you cannot buy an apartment for less than GBP 200,000 nowadays. In Sheffield and other smaller cities, on the other hand, you can find units from GBP 70,000 – 100,000.

    Can you get a mortgage if you don’t live in the UK?

    As mentioned above, it’s got significantly more difficult to get property loans as non-resident foreigner in the UK. The requirements are:

    • Being a resident for at least 3 years
    • Have a local job
    • Have a liquid private asset value of at least 25% of the property price
    • Open a UK bank account

    Can expats buy property in UK?

    Yes, expats actually have an advantage over non-resident foreigners as they (oftentimes) have a bank account, a work history, and a tax record in the UK.

    Conclusion

    Asian investors tend to invest in bigger cities like London and Manchester. This is mainly due to tradition, good education, closeness to relatives and a belief that the local property market will keep strong, over the long run.

    But London is stagnated and you should not neglect smaller cities like Sheffield, York and Birmingham, just to name a few. Speculators are certain that property prices will increase dramatically in these cities, you can also be sure to find properties with great rental yields.

    Property taxes are in the mid-level are far off the taxes we see in places like Singapore and Hong Kong. In total, you’ll only be charged a Stamp Duty Land Tax (SDLT) and sometimes a Capital Gains Tax (CGT).

    I hope that this article has been useful to you and wish you all luck with your property purchase in the UK.

    8 Responses to “How to Buy Property in the UK: A Complete Guide

    1. Haval at 6:21 pm

      Do you know if there is any restrictions for Iraqi people to buy a property in UK?

      1. Marcus Sohlberg at 10:49 am

        Hi Haval,

        As far as I’m concerned there are no special restrictions towards Iraqi people to buy property in the UK.

    2. Mel at 6:42 am

      Hi Marcus, good informative article. A few questions:-

      i. Thoughts on Southampton/Glasgow property market? In terms of rental yield and capital appreciation.
      Ii. Is the sharing scheme working ie we pay 40% to 50% of the house price and the rest is on monthly payment.
      III. Apart from property price, can you give an estimate how much is needed as legal fees, stamping and so on.

      Thanks.

      1. Marcus Sohlberg at 4:57 am

        Hi Mel,

        Regarding i. and li. , we mainly focus on property markets in APAC, I suggest you to contact a local agent to confirm these questions.

        Regarding lll. please check the information covered under stamp duty and capital gains tax above. Legal fee is £850-£1,500 including (VAT at 20%) according to moneyadviceservice.org.uk

    3. Javed Hemani at 8:45 am

      Hi.
      Being a foreigners, we can’t open a bank account in UK. How can I transfer money there.
      And How can we collect rents without having a bank account.

    4. Marcus Sohlberg at 1:01 pm

      Hi Javed,

      I would suggest you to post this question in our Facebook group:

      https://www.facebook.com/groups/asiapropertyhq/?source_id=1927429177495258

    5. Elisa at 3:25 pm

      hi

      if a foreigner ( Taiwanese ) purchase the property in the UK,
      Is there any chance to apply for the British esidency or citizenship? Thanks

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