There has been a significant surge in the number of overseas buyers and tenants expressing interest in UK property, the latest figures from property agent Knight Frank show.
So, why is demand for property rising among foreign buyers and tenants? And what implications could this have for the UK property market? Let’s take a look.
Why has overseas demand for UK property risen?
According to Knight Frank, almost a quarter (24%) of all web users looking at sales and lettings properties in the UK in August were based overseas. This is the highest the overseas figure has been since before the pandemic in January 2020. And it’s up on the average figure of 17% in the 18 months to June this year.
Further, the data shows that the number of overseas web users looking at lettings in August exceeded the number of users based in the UK for the first time since the beginning of 2020.
There are two main factors driving this increased demand. The first is a high number of overseas students who are beginning their property search ahead of the new academic year. The second is returning corporate tenants as more sectors and offices reopen.
Tom Bill, Knight Frank’s head of UK residential research, said: “International demand is undoubtedly building as the feeling grows that the worst of the pandemic is behind us.”
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What can we expect going forward?
In the lettings market, Knight Frank expects tenant demand to be more evenly spread over the year than normal as foreign students receive more clarity about face-to-face study.
In the sales market, the presence of foreign buyers is patchier, but numbers may begin to increase this month.
How could the demand for UK property affect purchase and rental prices?
The recovery of overseas demand, along with a relative scarcity of available properties, means that we might see house prices and rents go up in the foreseeable future.
Indeed, we are already seeing price increases in some parts of the country. Recent figures show that rents in London rose for the third month in a row in August after a year of decline. Further, research shows that the average monthly rent in the UK is now above £1k for the first time in history.
Property values, just like rents, are also expected to go up. For example, Knight Frank anticipates a 2% rise in prime central London by the end of the year. Next year, they think the rise could be as high as 7% as even more overseas demand kicks in.
What help is available for buyers and tenants?
Increased overseas demand for local housing and the resultant rise in purchase and rental prices means that prospective buyers and tenants might need bigger deposits in the near future.
If you intend to rent and rising prices mean you are having difficulty raising your tenancy deposit, there are ways to get help.
Your local council may offer a rent deposit scheme or rent guarantee scheme. This can help you cover the cost of your tenancy deposit. Additionally, you may be able to claim a Discretionary Housing Payment from your local council to help with your deposit.
Help is also available for those struggling to afford a mortgage deposit in light of rising property prices.
For example, a Lifetime ISA, which you can open using investing solutions providers like Nutmeg, can speed up the process of saving for your deposit. You can save up to £4,000 every year and receive a government top-up of 25%. You can then use the money towards a house deposit.
There is also the Help to Buy: Equity Loan scheme. Using the scheme, you only need to raise a 5% deposit. The government then supplements it with a loan worth up to 20% of the property value (or up to 40% in London).
By Sean LaPointe
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