For a long time, foreign investors have seen the UK as a safe place to buy property. So, in this article, you’ll learn everything you need to know to buy a house in the UK if you’re not from there.
Even though COVID-19 and Brexit have made things uncertain, investors worldwide are still optimistic and interested in the UK market.
There is a lot of potential for capital growth and rental income in all parts of the country. High demand, a lack of supply, high yields, and low prices keep the UK on the map as an international investment hotspot. Some people may be put off by the end of the stamp duty holiday in 2021, which also applies to foreign investors. However, investing in a UK property still has many benefits, such as strong market performance, growth prospects in the future, and a pound at an all-time low.
Let’s look at what makes the UK a good place to invest in property and answer some of the most important questions foreign investors might have before buying a property in the UK.
Foreigners Purchasing Buy-to-Let Properties in the United Kingdom
One of the most important things foreign investors consider when buying a property to rent out is the rental yields. Many cities have profitable buy-to-let options that give investors a chance to make a lot of money.
There are 25 postcodes in the UK with more than 6% rental yields, and Liverpool is one of the cities in England with the most buy-to-let postcodes. Please read our guide to investing in Liverpool real estate to learn more.
If you don’t like Liverpool, we’ve got you covered with our article on the Best Buy-to-Let Areas in the UK, which includes:
- Nottingham
- Manchester
- Bradford
- Leeds
- And Liverpool
Can someone from outside the UK purchase a home there?
The UK is open to non-British citizens, and you don’t have to be a British citizen to buy a house. At the same time, you might wonder if you can buy a house in the UK and become a citizen. In the UK, buying a home does not lead to residency or citizenship, unlike in other countries.
Nevertheless, some things need to be taken into consideration:
- Mortgages are harder to get.
- You might have to pay a big down payment.
- It would be easier if you bought it with cash.
- You will probably have to fill out more paperwork.
Keep reading to learn more about the problems you might face as a foreigner trying to buy a home in the UK.
Can people from outside the UK get a mortgage and buy property in the UK?
Should Foreign Investors Think About Leasing or Owning a Property?
Foreign investors looking at the UK housing market should pay attention to whether the property is leasehold or freehold.
Leasehold means that the investor does not own the building or the land. This is usually the case with flats or apartments. Leasehold is usually a good choice for foreign investors in the UK because there are fewer responsibilities and costs to fix the damage if something goes wrong.
Since they own the building and the land, freeholders are responsible for any damage to the property.
Can Foreigners Purchase Student Rental Homes in the United Kingdom?
Foreigners who want to invest in a buy-to-let property in the UK should know that there are two main types of rental homes:
- Student properties
- Residential properties.
Generally, student properties are cheaper to buy than homes, depending on where you live. This article, The Best Places to Invest in Student Housing in 2022, will help you find the right area.
Depending on the renter market you want to tap into as a foreign investor in the UK real estate market, you should concentrate on a certain sort of buy-to-let property. Students are a big market in the UK, especially in cities and university towns, and they often pay more rent than regular renters.
But there are usually more up-front costs, like wear and tear and renovation costs, to ensure the property meets the law. Read our article on investing in student housing in the UK if you’re unsure if it’s a wise choice.
Is UK real estate subject to capital gains tax for foreign investors?
When they sell the property, foreign investors who buy it will have to pay capital gains tax. The Capital Gains tax is based on how much the house’s value has grown since the purchase price. Foreign investors may not be affected for a few years.
As of April 6, 2020, you must file a non-resident CGT (Capital Gains Tax) return, pay the tax, and send it in on:
- Residential real estate or land in the UK
- Non-living space or land in the UK
- Mixed-use land or property
- Rights to assets whose worth derives at least 75% from British land
Do foreign investors in UK real estate have to pay rental income tax?
For foreign buyers who buy a buy-to-let property in the UK, any rental income the property brings in is taxed. The percentage is used to calculate the amount made, usually paid at the end of the tax year.
This article might be helpful if you want more professional advice on landlord tax in the UK.
Other things to think about and costs for foreign buyers who want to invest in the UK market
Do the right amount of research.
Before making a property investment, it’s important for overseas investors who don’t live in the UK to do the right amount of research. Foreign inventors should research the local property market, the company, and the developer behind the property or project and, if necessary, get a survey of the property.
Investors who can’t or don’t want to travel to see investment properties in person can buy a buy-to-let property online. Because of the COVID-19 pandemic and the UK-wide lockdowns, more property investment companies have these systems in place. Foreign investors can take virtual tours and buy a property from afar.
Hire a Solicitor
When buying a property, most people hire a lawyer to help with the legal parts. This includes doing due diligence, researching any legal issues with the property, ordering a survey to ensure there are no structural problems, and making sure the investment process goes smoothly overall.
Before giving a foreign investor a purchase contract, a leasehold agreement, and a completion statement showing how much money is needed to finish buying a property, a solicitor must also see proof of identity documents.
