Key Findings for Hong Kong & South East Asia Investors Investing in the UK
have emerged as prime investment destinations with high rental yields and tenant demand.
Birmingham has been the top performer for property price growth within the UK.
Worth of rental properties with five million rental homes in the UK property market.
How is UK Real Estate Market Performing?
Latest reports show that house prices are still increasing across the UK. Whilst the London market is stagnating and the high prices are forcing people to look at towards the wider UK – increasing demand in regional cities. Recent reports from Hometrack have shown growth in Edinburgh, Birmingham, Manchester and Glasgow surpass 7% year on year, with the UK as a whole achieving 4.4% growth on average.
As a property investor, all of this means there is still significant potential for capital growth and good rental yields. The UK is still growing, despite the uncertainty surrounding Brexit, and whilst there has been a shift in focus on residential property in the Capital in recent years, cities and areas of the UK that may once have been overlooked now present lucrative opportunities.
Looking to invest in London for a fraction of the price?
The London Commuter Belt Options
Slough – The UK’s Commercial Hub
Crossrail is set to be a game changer in the South East for access in and out of London, and since its launch in 2009 has seen house prices within a mile radius of its planned stations increase in value by 66% on average.
Bracknell – The UK’s Silicon Valley
Bracknell should be on the radar of every investor thanks to the large-scale regeneration and global technology firms that are driving professional demand. Directly linked with the capital, Heathrow Airport and other key destinations around the South East, Bracknell is a prime commuter location that has a lot to offer working professionals looking for a thriving, affordable market.
The Growth of Regional Cities
Best Performing: Birmingham
The UK’s second city ranks as one of the most popular in Europe in which to invest – higher than London – and is currently attracting £billions of investment into citywide infrastructure projects, retail, commercial and residential space.
Global businesses such as HSBC, Deutsche Bank and PwC are choosing to relocate their headquarters to Birmingham and the city has demonstrated its global appeal by winning the bid to host the 2022 Commonwealth Games.
Using a strategy of targeting key areas for investment, Birmingham has developed the largest professional services hub outside of London, demanding the attention of both domestic and foreign investors that are looking to expand and take advantage of a much wider client base.
3 Steps For Your UK Investment When Investing From South East Asia
Book a Face-to-face Strategy Meeting
Speak with our local international experts based in Hong Kong to discover the right investment for you
Reserve Your Property Unit
Then use our Tax specialists, Overseas Mortgage and Foreign Exchange Services available
Customer Care Turn-key Solution
Receive supported aftercare and property management services with our 360 Customer Services
Financing Your Property Investment
In terms of securing finance for a UK property, while many British high-street banks will have reduced products for overseas investors, you still have the option of visiting professional lenders. Trusted specialist lenders tend to have a wider outlook than mainstream organisations, offering better interest rates and more favourable terms. For Buy-to-Let property purchases, this will be the most common method of financing for investors.
Enquiries into the UK from Asia for expat mortgages have increased over the last couple of years, again, mainly from Hong Kong where property prices are some of the most unaffordable in the world. Skipton International saw a 65% rise in BTL mortgages from Hong Kong investors in 2018 when compared to 2016.
Fees and Taxes When Buying UK Real Estate
On Purchase – SDLT
Stamp Duty Land Tax (SDLT) is a tax on properties bought in England and Northern Ireland. SDLT is applied on any residential property purchase over £125,000 and is a legal requirement. The tax is different if the property is in Scotland or Wales and there are different rules depending on your current investment status.
When do I pay Stamp Duty?
You have 30 days to pay Stamp Duty Land Tax from the date of completion or you risk a fine. Remember, legally, it’s your responsibility to ensure this is paid on time. Always maintain your due diligence and ensure it’s being taken care of immediately after completion.
It’s a criminal offence to evade stamp duty, although there are some exceptions.
During Ownership – Income Tax
UK income tax is charged on rental income arising from UK property. When the property is owned and held by an individual, the income tax rate at the time is applicable. The highest rate at the time of writing is 45%.
Non-UK resident companies pay income tax at a rate of 20% on any UK rental income, while UK companies instead pay corporation tax which currently sits at 19%. From April 2020, non-UK resident companies will also pay corporation tax at this rate.
Non-Resident Landlord Scheme
As an overseas investor, you need to ensure you register to pay income tax under the Non-Resident Landlord Scheme.
For Buy-to-Let landlords, this works differently for tax purposes and means a non-residential landlord pays income tax on rental profits in the UK, rather than paying income tax in the country they’re based. To be classed as under this scheme, the landlord (individuals, companies and trustees) must live outside of the UK for at least six months. In partnerships, each person is considered a separate landlord.
On Sale – Capital Gains Tax
Capital Gains Tax (CGT) is the main cost when leaving the market and is paid on disposal of any residential investment property in the UK. CGT is always paid within 30 days of sale completion. Gains is identified as the rise in the value of the property aside from the purchase price and specific expenses which include:
- Buying costs – This could cover the purchase prices, legal charges and SDLT.
- Improvement costs – This covers the price of fitting any improvement such as central heating or any extension, provided the improvement is still in place on disposal.
- Any legal costs – Includes any legal costs such as a boundary dispute.
- Disposal costs – Generally this includes things such as estate agent fees, auction costs and legal fees.
CGT rates at the time of writing are 18% for basic rate taxpayers and 28% for higher rate taxpayers. Basic rate taxpayers pay CGT at 18% up to any amount of gain equal to their unused income tax basic rate band and at 28% on anything above this. Higher/Additional rate taxpayers pay CGT at 28%.
Mortgages for Overseas Investors
In terms of securing finance for a UK property, international investors will benefit from visiting a specialist lender. A trusted, specialist partner will tend to have a wider outlook than mainstream organisations, offering better interest rates and more favourable terms, particularly for international investors. For Buy-to-Let property purchases, this will be the most common method of financing for investors. Building a good relationship with your lender is vital, as will be choosing a partner that understands the market and products available so they can be tailored to your needs.
More specialist lenders, offering BTL finances to international and expat investors, are opening up their product offerings. While previous product ranges were more limited, many lenders are beginning to offer both fixed and tracker rates as well as interest-only and repayment options. This allows for different requirements to be met, whether a cash flow focus (fixed rates and/or interest only products) or loan reduction (repayment).
How has Brexit effected UK Real Estate?
Despite the uncertainty surrounding Brexit, the UK looks set to maintain its position as a leading investment market for international buyers.
In a recent survey by Knight Frank of 155 leading property investors, 21% of the respondents said the UK was their preferred investment market, up from 11% the year before. This is excellent news for a market that remains robust despite the political shifts over the last two years. The UK is still recognised as a strong overseas investment target, with the primary reasons for investing in the UK being potential rental yields (43%) followed by its stability (32%).
For the UK, undersupply highlights a much more pressing issue. Over half of the surveyed investors (55%) in Knight Frank’s research identified their main challenge as ‘lack of stock’ when investing in the UK, with only 15% citing geopolitical uncertainty as a constraint. These statistics all demonstrate the strength of the UK’s investment potential right now. Opportunities available are still attractive, particularly in regions that are driving new investment and redevelopment.
Completed Q3 2017
- Original £ per Sq Ft price: £215
- Avg Sq Ft Growth: +36%
- 1 Beds £110k – £150k = £40k (36% Capital Growth)
- 2 Beds £140k – £190k = £50k (36% Capital Growth)
- Actual Capital Growth Achieved: +36%. Avg Rental Yield: 7.7%
NOW SOLD OUT
Est. Completion Q4 2018
- Original £ per Sq Ft price: £282
- 2018 £ per Sq Ft price: £352
- 1 Beds £170k – £215k = £45k (26% Capital Growth)
- 2 Beds £200k – £250k = £50k (25% Capital Growth)
NOW SOLD OUT