Why Now is the Perfect Time to Invest in UK Property from Overseas
- The majority of mortgage enquiries in 2019 have originated from the UAE
- UK is widely considered a good option for international investors right now, as domestic buyers delay
- Foreign exchange rates mean other currencies can stretch further against a weaker Sterling
UK property has always been popular around the globe but the market right now represents a once-in-a-lifetime opportunity for international investors. We examine why now is the time to invest in UK property from overseas.
With the sector still recovering from initial Brexit uncertainty, transactions are down and London prices continue to suffer. For international investors, the UK now represents the opportunity to get an exceptional deal, with local currency stretching much further given the weakness of the Sterling.
As of 2016, the average London property would have cost $735,294 (Dh2.7m). Today the same property costs $621,300 – a change of $113,994 based purely on exchange-rate fluctuations.
According to research by Skipton International, the majority of mortgage enquiries in 2019 have originated from the UAE. As domestic buyers continue to delay ‘pulling the trigger’ on their investments, there’s a clear path for savvy international investors.
The traditional issue of financing is also starting to be less of a problem for investors overseas, as specialist lenders grow in popularity and high-street names join the market due to increased demand. Banks such as HSBC are offering the same rates to both domestic investors and expats, while building societies are growing more open to accepting foreign currency.
There’s also more choice, with properties able to be funded by either a residential mortgage or a Buy-to-Let loan. While residential mortgages are based on overall affordability, Buy-to-Let mortgages are instead calculated on the yield from letting it out. Buy-to-Let mortgages typically charge more but more money can be borrowed with the rental income taken into account.
According to Hannah Aykroyd of Aykroyd & Co, a buying agent based in London, she has seen a huge rise in activity around the world.
“We have had clients flying in from Asia and the Middle East… she said. “House prices in prime areas are down about 30pc since the 2014 high. Combined with the weak pound, this means some buyers – such as those from America – are looking at an effective discount of over 50pc. The weak pound is a strong motivator to buy now.”
Crucially, the UK’s historical performance shows a market that has recovered well after a decline. After 2009, the market pushed to new peaks around 2014 and continued to rise until the Brexit referendum. Taking into account this history, alongside the UK’s reputation as a robust market, there’s potential for huge returns through growth once the political situation has been addressed.
We can already see this in locations such as Birmingham, which has led the way for property growth since 2016 at 16%. For an overseas investor, an investment in this prime location would offer an affordable alternative to London that is forecasting incredible growth.
This rising interest from overseas has also facilitated the rise of ‘ready-made’ investments. Offering a fully-furnished apartment and immediate rental income with a tenant in-situ, these ‘hassle-free’ opportunities can be ideal for international investors that want an immediate benefit in a prime destination.
The general consensus abroad is that the UK is a rare opportunity right now. According to Charlie Wells of Prime Purchase, a buying agent, ‘interest from expats is expected to grow as they’re typically more optimistic than domestic customers.’
“The view of overseas buyers is that Brexit is a bit of a circus and it will be out of town at some stage,” he said. “Whether they are Americans, Europeans or Brits living overseas, there are no reservations about buying in Britain.
Despite this glowing opportunity, overseas investors – particularly UAE-based residents – will still need to remain cautious. While it’s been a better time to invest in UK property from overseas, there’s still a degree of uncertainty until Brexit is done and dusted.