There is a new wave of overseas investors looking to buy into the UK rental market. We are seeing an emerging trend of moderately wealthy individuals who are looking for a relatively safe place to invest with a strong currency.
These are not the Pandoras Papers billionaires looking to hide cash in premium property, these people can only buy with a mortgage and even then, they need a tenant to pay rent to cover the cost of borrowing.
These new investors are similar to smaller UK landlords and are filling a gap in the private rental sector being left by a fall in domestic landlords.
The new overseas buyers look for somewhere safe to put their money that will produce sufficient income to cover their investment. Developers know this and this demand is underpinning the viability of larger and more impressive schemes. These developments boast top quality leisure facilities, hotel style concierge services and unrivalled communal areas.
This creates opportunities for British young professionals to rent quality accommodation and for UK management companies to let and manage the units on behalf of these investors. Developers are creating quality accommodation in city hubs such as Manchester and Leeds, knowing that many buyers will be investor landlords who will rent them out to the local population. This works well for the local area as the properties are filled quickly and the residents can engage with and be part of the community.
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However, these more modest investors need a mortgage in order to buy, which creates an opportunity for the mortgage finance market. There are very few lenders in the UK who have expertise in dealing with overseas buyers like this, with BC Invest being one of them. It is important to work with a specialist who can help smooth the borrower journey and deliver swiftly – for example committing to providing a loan offer within seven days of payment.
There is an opportunity here for the mortgage broking community to tap into this growing client base and advise foreign buyers on UK buy-to-let mortgages. They will need your advice, as this is a complex area and there are few products available.
In our own experience, we find that these clients make good credit-worthy borrowers but have difficulty accessing property finance due to their non-resident status. We see a growing demand from our developer relationships to have funding for their buyers, which we can provide, but there is an advice gap in this space.
Many lenders will support applications from expatriates who hold a UK passport with a UK bank account. It is a completely different ballgame with genuinely overseas investors when this may be their first significant transaction in the UK with no financial footprint here. Getting a UK bank account can be nigh on impossible and proving income can be challenging.
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This is why we work with a network of experienced brokers who have identified the opportunity within this space. UK property transactions can be incredibly opaque and frustrating at times, even when you have grown up here,. Whilst we may take our understanding of the legal system for granted it is not always user friendly and can be a worryingly slow process for international buyers used to immediacy of information. This is why the broker plays such a crucial role in the process and the efforts of these brokers to translate and smooth the process is hugely appreciated.
This year has demonstrated the resilience of the residential property market against a backdrop of economic uncertainty. Transaction volumes have at times hit record amounts and despite increase taxation, the international investor appetite has remained unwavering. We believe this international demand is set to grow and hence the demand for financial advice and support in these transactions will increase too.
Together we believe we are forging strong partnerships to support a challenging but rewarding market in a space where domestic landlords are scaling back. Providing transparency to an extremely opaque environment will allow the property market to continue to expand and the quality properties for the domestic rental occupiers will continue to improve.
By Richard Boyle
Source: Mortgage Strategy