As per the new analysis by the Centre for Public Data, the number of properties in England and Wales owned by foreign citizens tripled from 88,000 in 2010 to nearly 250,000 in 2022.
UK nationals living or working abroad or foreign investors from the US, Canada and East Asian nations are investing in UK homes due to the opportunities offered by a weaker pound, a price slump in London's new-build market during the lockdowns, and renewed confidence in the UK's economy and the success of the vaccine programme.
As a result, over 247K residential properties across England and Wales are registered to people with an overseas correspondence address. It is up to 1 per cent of all registered titles, which was just 0.4 per cent in 2010( as per HM Land Registry data).In the post Brexit phase, leaving without a trade deal with the EU affected the market, but the UK remains a favourite destination for overseas buyers.
London's prime residential property market has always attracted investors from across the world. Many overseas companies and individuals wanted to purchase a house or office in the United Kingdom for reliable government policies, stable government, new opportunities in declining markets, declining currency value and short-term tax rebates.
How to Buy a Home?
To purchase a home, you need to follow the steps below,
Overseas buyers, particularly high net worth individuals or firms, often gravitate towards what is known as Prime Central London, namely Mayfair, Westminster, Kensington and Chelsea, and even there, there are good streets and better streets. However, a property search is time-consuming, so hire a specialist broker for finding a property. First, identify the area where you'd like to buy a house.
Check the property listings offered by the broker. Look for the highest possible number of houses available in your budget in the region and compare their features and prices.
Hire a solicitor to handle the legal processes involved in the property transition. The lawyer or issuer regulates the agreements and the exchange of funds, and he will be responsible for handling the registration process, completing surveys, and registering inquiries.
If you spot a property that you would like to purchase, the broker or agent will post a bid to the seller or send your proposal directly to the seller;
Ask the broker or seller to arrange for a viewing of the property. Then, organise a site inspection or survey, where a premises assessment shows how much work will be required to repair the damages and refurbish the house.
Speak to the broker about the actual sales agreement and then negotiate and ask if the price can be adjusted downwards or if there are estate damages that need expensive maintenance.
After all the legal formalities, you need to exchange agreements with the seller, get the title deed and get the keys to the house.
Then you will have to arrange to move into the new house. First, get the house registered and pay the stamp duty and all the legal bills and fees of the solicitors and broker.
Can Foreigners Buy Property In London?
London's prime residential property markets are considered attractive investments for overseas buyers. International buyers have been buying prime properties in the capital city to benefit from the tax savings offered by the government to support the housing market during the lockdowns.
Meanwhile, the UK government offered a new Visa scheme, where new opportunities are open to holders of BNO passports in Hong Kong, allowing citizens to relocate, which has driven up overseas interest in UK property.
Since 2022, banks claim they have seen foreign income mortgage businesses rise. (Any mortgage loan request to buy UK property will be confirmed by the lender taking charge (mortgage) against it, registered at the Land Registry. Mortgages in the UK are a kind of 'recourse'; if the borrower makes defaults, the lender forecloses, and the borrower and any guarantor of the loan are liable for any shortfall.)
Foreigner Buying a Property in UK Tax
Tax is complex for overseas buyers, dependent on individual circumstances, and rules vary depending on the commercial or residential property type. However, one should note that the UK Land Registry is open for all so that anyone can see the name of the owner of the property and the price paid.
Some of the common taxes paid when you purchase property in the UK are
Inheritance tax – (Which is charged at 40% on the net value of an individual's estate above the 'nil-rate band' (currently £325K)). Exemptions apply when the asset is transferred between spouses (unless a non-domiciled spouse inherits from a UK domiciled deceased spouse). So for non-domicile, their UK based assets will be subject to Inheritance Tax.
CGT - In most circumstances, non-UK resident individuals are outside the scope of CGT, although if you have been resident in the UK or intend to become resident in the future, you may have to pay.
Income Tax – When a property owner gets rental income from a UK house, they need to pay tax on such income (or corporation tax if the owner is a company or a branch of a company). Individuals will be taxed at banded rates, the highest of which is 50% on income above £150K per annum (reduced to 45% from 6 April 2013).
SDLT – This is a transfer tax that applies to the gross value for which the property is purchased.
Annual Charge – From 1 April 2013, you need to pay the annual charge, though you may get certain exemptions.
You may be able to add value by adding certain changes to the preexisting property, converting it or re-developing the house. However, depending on the type of house/building and the nature of refurbishments, it may require planning consent and permission to extend leasehold( in the case of leasehold property).
If the property is flat, it may be possible, together with the owners of other flats in the building, to acquire the freehold. The taxpayer may enrol with the Non-UK immigrant Tenant Scheme at HMRC to get some tax relief.
What Should I Consider Before Buying A Property In the UK As A Foreign Non-Resident?
You need to check your visa requirements.
Know your budget.
Be aware of the difference in culture and legal structure.
Meet a trusted realtor and choose a prime property.
Foreigners and non-residents can get a mortgage. However, those with less than two years of residency and without a job may face tough requirements and may have to offer a bigger deposit, or they may have to pay higher mortgage interest rates.
Indian Resident Buying a Property in the UK
Indian residents can purchase immovable property in the UK, subject to certain conditions on the payment, where they will have to make payments from Resident Foreign Currency (RFC) account. Certain limits under LRS are applied, as they should not exceed USD 2.5 lakhs a year.
The limit applies to all the transactions made for expenses like overseas education, travel, maintenance of relatives, medical treatment or investment in real estate. The buyers can purchase homes on lease for five years and gift them to friends or family.
Buying Property in UK Nonresident 2019
Nationwide states that the sales in January 2022 were up by 11% on the same month in 2021, giving house price inflation the strongest start (since 2005). The building society claims the property transactions in the last year (2021) were the highest since 2007 and about 25% greater than in 2019 before the pandemic struck.
A separate report by the agent's Knight Frank suggests that the fastest growth in property values was seen in the home counties and on the outskirts of London, as buyers were investing in houses with large outside space and good schools nearby.
Buying Property in the UK as an Overseas Investor
Whilst the market is getting busier and prices are rising, several changes have been made to UK property legislation that implies that overseas buyers should be aware if they intend to buy property in the UK in future, as given below-
From 1 April 2021, the UK government announced that oversea buyers would have to pay up to a 2 per cent surcharge on their SDLT bill when buying the property. The surcharge was implied for overseas buyers, categorised depending on the property's price.
For example, a buyer of a £5mn property who already owns one or more properties in the UK or elsewhere will be liable for £748,750 in SDLT. A buyer of a £10mn property will be liable for £1,445K in SDLT.
It was introduced to make the property rates affordable to the local buyers. This surcharge applies to residential property (freehold or leasehold) situated in England or Northern Ireland, where the buyer or one of the purchasers is not a UK resident.
It will apply to the full purchase price and includes buildings under construction to be used as residential homes and off-plan purchases. For buyers searching for a property in the UK post-April 2021, having a British passport could significantly reduce the SDLT bill.
The UK government announced that they intend to register beneficial owners of overseas companies and other legal entities owning UK property in 2021. If this register is introduced, all overseas entities who wish to participate in property investment (buy, sell, or grant a long lease) will need to be on the new register of Companies House that will record details of the company's beneficial ownership.
Where Is The Cheapest Property To Buy In The UK?
The cheapest property in the UK was offered in Blaenau Gwent in Wales, where an sqm of the home got just £1,268 on average.
The prices were low in the former coal-mining and steel-working industries sites. In England, Burnley in Lancashire reported the lowest cost per sqm. The average size in Burnley is 88 square metres, which equals just £1,277 per square foot. It is over 20 times lower than some parts of London. Another area in Lancashire, Hyndburn, is ranked third cheapest.
Is Buying Property A Good Investment In The UK?
Some of the drawbacks of buying real estate or real estate financing are that one should be aware that property is an immovable asset, and it can take months to exit it. The price can see medium volatility. Over some years, the investors may see losses. There is no 'government support' over the value of a property.
Some benefits of buying are - You can earn rental income, and at the same time, you could generate capital growth as your money grows and your property value increases.
Can Foreigners Buy Property In The USA?
Foreigners can buy a property in America without any restrictions. Nevertheless, they may face issues at the time of financing as you may be charged higher interest rates, and only a few specialised banks may approve your application.
If you're a non-resident, you might find it easiest if you can fund the payment with cash, as getting a local mortgage may be tricky if you have no local credit history.
You will require proof of income, affordability, IDs and proof of address( residence status). Also, you need to be aware of tax obligations applicable to non-residents. It is advised to hire a real estate agent to know all legal aspects.
Anyone may buy and own property in the United States or the UK, regardless of citizenship. There are no laws or restrictions. As a result, the UK property markets have been attracting high net worth investors worldwide.
Though international buyers have been snapping up prime properties in London to take advantage of potential tax savings offered by the government to support the housing market during the Covid-19 crisis, the UK government announced that they intend to introduce a register that will record details of the beneficial ownership of the company.
In general, the UK economy and the UK property market are strong. So investors are interested in buying, but there are additional tax rules for overseas buyers. When lending to overseas buyers, a specialist bank or lender is usually required, particularly where there is an offshore company.