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2022 Outlook for Expats & Foreign Investors Buying UK Property

There have been a lot of new factors that have impacted the UK property market in recent years, from Brexit and tax changes to the ongoing consequences of the COVID-19 pandemic. For Expats and Foreign Property Investors, the UK still presents some profitable investment opportunities, as long as you are able to find the right types of investment.

From April 2021, overseas buyers have been required to pay a 2% stamp duty surcharge, which affected many property investment strategies. However, there are still many benefits of investing in the UK compared to other parts of the world, such as relatively low house prices, attractive interest rates and a very healthy property capital growth.

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The impact of COVID-19 on UK Property Market

The UK property market has remained strong, largely due to the stamp duty tax holiday that the UK government introduced. House prices have increased significantly, with the average house price having now increased by approximately £34,000 from the beginning of the pandemic. House price increases are expected to slow down in 2022, with the average UK House Price standing at £276,091 as of December 2021 (source: Halifax).

People want more space

Another major factor impacting property investment is the change in demand for housing stock that has more space. After spending so much time indoors during lockdown, many homeowners and renters decided that they wanted to find property that is in rural areas and has more space both indoors and outdoors.

Influence of Homeworking

London, which was always a highly popular place to live, saw record numbers of homeowners leaving to buy property outside of the capital in 2021. With more people working from home and less need to travel into the city for work, the trend for buying property with gardens and home offices emerged and is expected to only continue in 2022.

North of England continues as a Hotspot

Many other cities across the UK saw similar patterns and the North of England saw higher interest in properties, with areas such as Manchester and Liverpool becoming ever more popular for Property Investors & Landlords. The high rental prospects in the North, combined with the excellent capital growth have ensured that the North of England has become a hotspot for Property Investors.

The average rental yield in the Northwest was 7.8% in 2021 and the area saw a 12% regional increase in value, so going into 2022, we expect Property investors will increasingly be looking at buying in this part of the UK.

Student Accommodation in high demand

The large student populations in northern cities are keeping rental demand high and with large numbers of foreign students requiring student accommodation that is of a higher specification, this gives investors the opportunity to charge higher rental yields.

Many expats and foreign Property investors are seeing the great investment potential of buying student accommodation to rent in areas where there are numerous universities and where the average property value has grown significantly in recent years.

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Green efficiency requirements

As well as the additional 2% stamp duty surcharge, foreign Property Investors looking to buy property in the UK will also need to be aware of the new green efficiency requirements. From 2025, rental properties must have an EPC rating of C or above, or they will not be able to accept new tenants. 

This has resulted in many existing landlords spending money in home improvements such as installing new windows and replacing older boilers with new, more energy efficient ones. For foreign investors with existing properties in the UK, improving the EPC rating of properties will impact profits and investors looking to buy new property may have to pay more for properties that have a higher energy efficiency rating.

Around 13 million UK homes have an EPC of D or below, so this will be a significant factor to consider for foreign investors and expats buying in the UK property market.

Expats heading back to the UK

Since Brexit and the red tape involved in obtaining EU Settled Status became a problem, there has been a huge uplift in the number of expats returning to the UK, with people giving up on their lifelong dreams of retiring to live in a warmer part of the EU.

Some expats have been exploring the idea of buying property in the UK to rent out for periods of the year that they are not in the UK and living there themselves. With the new ruling that British citizens cannot stay in the EU for more than 90 days in any 180-day period, this has changed the needs for having somewhere to live in the UK, that can also be rented out if necessary.

Conclusion

In 2022, there will still be very attractive mortgage deals available for foreign Property Investors and expats buying property in the UK. Although house price growth is predicted to be much slower in 2022 compared to 2021, the many other benefits of buying UK property will ensure that foreign investors are still able to get a good return on investments in the UK by identifying the most profitable investments.

Get in Touch

If as either an Expat or Foreign Property Investor you are considering buying a new UK home, or even remortgaging your existing property in 2022, contact us today for free and independent mortgage advice. Call us now on +44 1494 622 555. Alternatively, you can complete this short online form now to request a call back from one of our Team of highly experienced Expat Mortgage Advisors who will gladly assist you with all your Expat and Foreign Property Investor mortgage needs.

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Truss to announce stamp duty cut – report

UK housebuilders rallied on Wednesday following a report that Friday’s mini-budget could include a plan to cut stamp duty.

According to The Times, prime minister Liz Truss will announce the move in the mini-budget in an attempt to drive economic growth. It was understood the PM and chancellor Kwasi Kwarteng have been working on the plans for more than a month.

Truss believes that cutting stamp duty will encourage economic growth by allowing more people to move and enabling first-time buyers to get on the property ladder, The Times said.

It cited two Whitehall sources as saying that cuts to stamp duty were the “rabbit” in the mini-budget, which the government is billing as a “growth plan”.

Under the current system, no stamp duty is paid on the first £125,000 of any property purchase. Between £125,001 and £250,000 stamp duty is levied at 2%, £250,001 and £925,000 at 5%, £925,001 and £1.5m at 10% and anything above £1.5m at 12%. For first-time buyers the threshold at which stamp duty is paid is £300,000.

During the pandemic, then chancellor Rishi Sunak lifted the stamp duty threshold to £500,000.

At 0910 BST, Persimmon shares were up 5.4%, while Taylor Wimpey and Barratt were up 4% and Berkeley was 3.5% firmer. On the FTSE 250, Redrow was 5.6% higher, while Bellway and Crest Nicholson were up 3.6% and 3.4%, respectively.

Tom Bill, head of UK residential research at Knight Frank, said: “Nobody can accuse the new government of lacking an economic vision. If its low-tax approach extends to stamp duty, recent history tells us it will trigger higher levels of demand in the housing market at a time when mortgages are getting more expensive, which will support social mobility.

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“Prices could move higher in the short term if supply initially struggles to keep up but more balanced conditions will return provided the cut is immediate and permanent.”

Neil Wilson, chief market analyst at Markets.com, referred to the potential stamp duty cut as “the old Tory trick of juicing the housing market in its heartlands to boost confidence (wealth effect) whilst doing not a lot for housing supply”.

“I’m not for concreting over the green belt at all, but there will be questions about the economic soundness of this policy, as there always is. However, with interest rates rising so quickly, an offset to the cost of buying a home would grease the wheels of the market -without higher rates could cause the housing market to seize up.”

He added: “Clearly a stamp duty cut is good news for housebuilders who can expect higher selling prices as a result.”

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, argued that a stamp duty cut could do more harm than good.

“Buyers are unlikely to be unhappy at the prospect of a tax cut, but if the government chooses to cut Stamp Duty in an effort to stimulate the housing market, there’s a risk it could do more harm than good.

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“It’s easy to see why the government is concerned about the housing market. We’ve seen demand fall consistently since May, when rocketing bills, rising house prices and ever-increasing interest rates started to take a toll on buyer enthusiasm. There’s a risk that if rate rises accelerate, pressure on buyers could reach a tipping point, where demand dries up.

“We know from very recent experience that a Stamp Duty holiday can stimulate demand. However, the only reason these holidays work is because people feel they have a small window of opportunity to take advantage, otherwise they’ll miss out. The point at which they think they can just wait for the next one, they will start to become less effective.

“Even if it does stimulate demand, it overlooks the fact that the real brake on the property market is a severe shortage of supply. With an average of 36 properties on each agent’s books, we’re still close to an all-time low in the availability of property for sale. Driving demand without addressing supply would risk more buyers chasing a tiny number of properties, which would push prices up.

“By ramping up prices at a time of rising mortgage rates, the end result would be higher monthly mortgage costs, which would be increasingly unaffordable. And the Stamp Duty holiday wouldn’t help on this front. This in itself could be enough to put buyers off, and if it deters enough of them, it could end up having the opposite impact to the one that’s intended.”

By Michele Maatouk

Source: Sharecast

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Bank of England to suspend market operations for State funeral

The BoE said CHAPS will be closed on 19th September, in line with its normal bank holiday arrangements.

CHAPS handled around 174,000 payments each day, in the year to February 2021, with an average payment value of £2.1m. That works out at around £367bn each working day.

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CHAPS is used by banks and large corporations to settle high-value money market and foreign exchange transactions, by companies to pay taxes, and by solicitors and conveyancers to settle property transactions.

The Bank’s Real Time Gross Settlement (RTGS) service, which underpins large transfers between bank accounts, will also be closed.

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Back in 2014, RTGS collapsed for most of a day, putting thousands of housing market transactions on hold.

Last week the BoE said the sale of corporate bonds held by the Asset Purchase Facility will be delayed by a week, to 26 September, following its decision to delay its next interest rate decision by a week (to 22nd September).

Source: London Loves Business

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London rental properties letting within minutes

One lettings agency in London says that tenant demand is so great in the capital for rental properties that many homes are being let within minutes of becoming available.

Benham and Reeves point to demand created by the return of professionals and international students, along with the growing shortage of available properties to rent, for creating a ‘challenging market’.

Tenant enquiry levels have continued to increase over the summer, across the firm’s 19 branches.

They say this is the ‘Most competitive London rental market that we have ever known’.

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Many branches have had almost no stock
In addition, tenants are finding that many branches have had almost no stock available, at best one or two apartments available to rent.

In a market update, the agent says: “Many properties are renting within hours – and some within minutes – as applicants immediately make an enquiry as soon as a property goes live on our website.

“This is swiftly followed by a full asking rent offer and once agreed, a holding deposit – so anxious are they to secure a property.

“This of course is great news for buy-to-let investors who, in many parts of the capital, are seeing their rental properties let immediately with voids at an absolute minimum. Sometimes just a day or two.”

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London is now a ‘landlord’s market’
The update also makes clear that the imbalance between supply and demand means that London is now a ‘landlord’s market’ with property investors expanding their property portfolios.

And rents are rising to pre-pandemic levels – some are now 10% higher.

Investors from overseas are also finding that the weakness of sterling makes London property considerably more affordable, while the shortage of rental properties means demand is the highest that the agent ‘has ever seen’.

Professionals returning to live and work in London, along with international students, are fuelling demand.

In some areas, including the City and east London, around 85% of applicants have been international students.

With the rental market so competitive, tenancy renewals remain at an all-time high – often more than 90% of existing tenants are renewing because they see there is a limited choice of properties available.

Source: Property 118

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Prime house price five-year forecast revised

Savills has released a revised five-year forecast for the UK’s prime housing markets, reflecting strong levels of activity in prime central London and prime regional markets, but also a backdrop of international and domestic uncertainty.

While the shape of recovery remains broadly as previously forecast in November 2021, the long-awaited bounce in values in prime central London has been pushed out to 2023. The firm expects prime central London’s house prices to grow 4% across 2022 (down from 8% previously forecast in November 2021). This reflects a slower pace of return of international buyers than anticipated, as well as the war on Ukraine and current domestic political instability which have caused a degree of caution that is constraining price growth.

Savills expects a more significant recovery in 2023, and has forecast growth of 7% (up from 4%), with the pace of demand from overseas expected to increase.

Over the next five-years, prices in prime central London are expected to rise by a total of 21.6%, despite a slight slowing of growth in the run-up to the expected general election in 2024.

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“Strong activity over the past six months, the relative value on offer and the prospects for global wealth generation together give us confidence that prime central London will continue to recover steadily over the next couple of years,” comments Frances McDonald, research analyst at Savills.

“However, the pace of return of international buyers has so far been slow, holding back the more rapid recovery we had previously anticipated. Early indicators suggest that things should improve over the second half of the year and into 2023, as high-net-worth buyers have gradually started to return to traditional prime postcodes such as Chelsea, Belgravia, Kensington, Mayfair, Notting Hill and Holland Park over the past three-months, boosting the outlook for price growth beyond this year.”

“In the longer term, requirements to register beneficial ownership of homes held in offshore vehicles have the potential to curb some demand amongst a limited number of buyers in the longer term. But, while historically there have been many benefits to using offshore vehicles to hold UK property, the tax advantages have largely already been removed. As such, we have only slightly reduced our outlook for prices over the next five years,” continues McDonald

In the more domestic markets of outer prime London, continued unmet demand from those looking to upsize and a lack of suitable stock will support price growth in the short term. Savills has forecast that price growth in these markets will average +5% in 2022.

But while the prime markets (broadly the top 5%-10% by value) are generally more resilient to interest rate rises and the increased cost of debt, they are not completely immune. Savills expects to see signs of price sensitivity creep into the market over the next six months, resulting in slower growth from 2023 onwards. This is expected to cap price growth at 13.6% over the five years to the end of 2026.

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“Over the medium term, the return of workers to the capital will fuel demand. Even as hybrid working becomes more conventional, workers still value proximity to the office and some of those who bought a home in the country during the pandemic are realising the need for a pied-à-terre, further supporting demand for flats,” continues McDonald.

“From 2023 onwards we are forecasting slightly lower levels of price growth with rising pressure on buyers’ spending power, though the effect of earlier than expected interest rate rises is likely to be offset by an easing in mortgage regulation and an increased flow of capital coming out of central London.”

Scotland, the Midlands and the North expected to perform the strongest in the long term

Following two years of unprecedented price growth (+16% since March 2020), the pace of growth in the prime regional markets has started to slow. However, activity continues to be strong and there remains an imbalance between supply and demand across much of the market, which will support price growth in the immediate future.

Savills forecasts that prime regional markets will grow by an average of 5% in 2022, led by growth in London’s suburbs (6%), with prices growing more steadily thereafter (18.8% over the five years to the end of 2026).

“Growth in the medium term will depend largely on further interest rate rises and the rising cost of living which will limit buyers’ spending power. This will have the most significant impact on markets where buyers typically take on more debt.

“As a result, we are likely to see a continued slowing of growth towards the end of this year, and whilst we are not expecting a significant correction in price levels, realistic pricing from vendors will once more become all-important. This will be particularly true for markets which have seen the strongest growth since the start of the pandemic, namely London’s suburbs and the coastal and rural markets in the south of England which performed phenomenally over the course of the pandemic,” concludes Savills’ Frances McDonald.

Longer term, the prime markets of Scotland, the Midlands and the North of England are expected to perform the strongest, due to greater capacity for growth (compared with those in the South). Savills has forecast 21.7% and 22.8% total growth over the next five years.

By MARC DA SILVA

Source: Property Industry Eye

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Overseas investors ‘will not be deterred’ from UK property by new rules

Despite measures and additional taxation to curb overseas investors in UK property, the asset class still holds great allure for a number of reasons.

On 1 August 2022, a new register of overseas entities was launched in the UK. This means anyone investing in or acquiring property in the UK from abroad will need to register with Companies House.

The aim of the register is to prevent individuals or companies buying property with illicit funds, but some believe the additional paperwork could serve as a deterrent for some legitimate overseas investors.

However, David Hannah, group chairman at Cornerstone Tax, believes the UK property market will still provide enough of an attraction to foreign buyers for myriad reasons, as it still presents an “exciting opportunity”.

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Big demand from overseas investors
Hannah points out that the UK property market is very much an international market, and it can therefore be affected by geo-political events all over the world.

“Even if domestic demand cools, I think international demand will increase and the UK market will be affected because of it. I don’t think foreign investment will be overly deterred by the new rules coming into place on 1 August.

“Property in the UK represents an exciting opportunity for foreign buyers because of the drop in the value of the pound.”

The historic house price growth has always provided an attraction to overseas investors, gaining the sector a reputation as a safe haven as it generally shows less volatility than many other asset classes.

In recent years, this growth has been even stronger due to a range of contributing factors.

Hannah comments: “UK house prices continue to rise at a staggering rate domestically, being pushed higher by factors such as the influx of oversea investors.

“In the past, factors such as the stamp duty holiday have caused more people to consider buying property. However, due to the increase in average house prices, it has made it more difficult than ever for buyers to purchase their first property.

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What’s in the pipeline?
Recent data revealed that overseas investors now own around £90.7bn of property in England and Wales. Around half of this (£45.3bn) is concentrated in London, which has historically attracted the most attention from foreign buyers.

This was according to research from Benham and Reeves, which also named the south east and the north west as the top two property investment destinations for those living abroad, after the capital. Overseas owners have around £15.6bn tied up in the south east, and £7.6bn in the north west.

In total, according to Benham and Reeves, 247,016 properties across England and Wales are owned by overseas investors. As well as the highest value of properties, the highest number of these can be found in London, with 85,451 foreign-owned.

One of the biggest draws in recent years has been the falling value of the pound, which makes it cheaper for overseas investors buying property here.

A challenge for anyone buying property right now in the UK is the supply gap, as less sellers have been coming to the market.

Hannah notes that the 24% rise in prospective sellers putting homes on the market offers hope that this trend could be easing, “thus causing a more manageable supply and demand level and potentially slowing the rapid rise of property prices”.

The register will also be applied retrospectively to property bought up to 20 years ago in England and Wales and since December 2014 in Scotland. UK property owners who live overseas should ensure they are up to date on the latest requirements.

Source: Buy Association

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I could have fixed my mortgage rate for years longer. I’m a fool

I have been having flashbacks. Not the kind I used to have, of when I went hiking in Yosemite National Park without a map and ended up sliding down a bear-infested trail on my backside in the dark. No, these flashbacks relate to a time in my more recent life, and an ill-fated conversation with my mortgage broker in July last year that led to a severe financial misjudgment.

My wife and I had just sold our house while juggling careers and three small children, and it was time to choose a mortgage for the new one. Should we take a two-year fixed-rate deal or a five-year one?

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The five-year mortgage was with Santander, and the two-year with the West Brom building society. Both had interest rates of just over 1.2 per cent, and our broker pushed for the two-year deal. The Bank of England base rate was 0.1 per cent, and he said he would be stunned if the base rate or mortgage prices went up significantly by summer 2023, when we’d be due to renew. Plus (and after this week’s 0.5 percentage point rate rise, this is makes me squirm the most) he reckoned being stuck with a five-year deal and its hefty early repayment charge was the riskier option.

The clincher was that the West Brom would lend us £40,000 more than Santander would because it had a more relaxed affordability calculation, and we wanted that money — the place needed some work. It was an interest-only mortgage, which appealed because the repayments would be low while my wife was temporarily out of work. The two-year deal it was.

Fast forward a year and . . . yes, I know, I’m an idiot.

Since we took out our mortgage the base rate has risen six times, now sitting at 1.75 per cent. It is heading in only one direction, and could be as high as 3 per cent when our two-year fix term ends.

Lenders, of course, follow the base rate when setting their rates. According to the data firm Moneyfacts, the average two-year fixed-rate deal has gone from 2.55 per cent to 3.74 per cent since we took out our loan, and the average five-year fixed rate is up from 2.78 per cent to 3.89 per cent. Next summer we may be offered 4 per cent, which could mean paying £1,000 more each month than we do now.

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So what can we do about it? Work is about to begin on the downstairs of our house, and it’s becoming ever more expensive because of inflation — we’ve now scaled back our plans and are leaving a tumbledown garage in place. We’ll mitigate the impact of our bigger future mortgage payments by setting aside money each month, and perhaps overpaying on our existing deal. We’ll burn through our savings.

However, for many borrowers coming off fixed rates next year, the prospect of a deal at a much higher rate is going to trigger a “payment shock”, as the broker Andrew Montlake puts it. Of course, at this time of pandemic, war, rising inflation and heatwaves, planning anything is difficult — from when to remortgage to how often to water the garden. I’ll be far from alone in facing nasty flashbacks over the coming months.

By DAVID BYERS

Source: The Times

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Will new disclosure rules deter foreign buyers?

The UK property market continues its upward trajectory as recent data from Halifax shows that the average house price now stands at £294,845, which represents a 6.8% rise, or £18,849 since the start of the year.

Supply-demand imbalance continues to be the main contributor to the rising prices.

With inflation in the UK rising to 9.4% in the year to June – marking its highest rate in 40 years, many are expecting a sharp decline in the property market, but the influx of foreign investment for properties in the UK could continue to push house prices higher. Recent research from Benham and Reeves shows that overseas nationals now own almost 250,000 homes across England and Wales – amounting to £90.7 billion worth of property.

London continues to be home to the highest value of foreign-owned homes, with all of the city’s top five property deals in 2021 – all of them worth £20 million or more – involving Chinese billionaires according to Beauchamp.

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Following sanctions imposed to Russian investors there were fears that foreign investment would falter, however Chinese investors seem to have picked up the slack. There are now 85,451 properties (amounting to a total value of £45.3 billion) in the capital owned by oversea investors who are able to take advantage of the UK’s thriving market.

The drop in the value of the pound, which has fallen by 11% since the start of the year, seems to be one of the major appealing aspects of buying property in the UK. 61 luxury properties in London – each worth more than £10 million, have been sold in the first six months of 2022 – representing the highest number in a decade.

Even though overseas buyers are an important segment of the market throughout the UK, there have been attempts to deter foreign investment.

There will be an introduction of new rules that will come into force on 1 August. The new register of overseas entities maintained by Companies House means that buyers will be forced to declare their ownership and provide details of beneficial owners.

The register will be publicly available at Companies House and intends to dissuade individuals looking to buy UK properties with illicit funds. It is unclear how significant this new regulation could be and whether it will deter foreign investment in the UK property market.

David Hannah, Group Chairman at Cornerstone Tax, is not convinced that it will.

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“What people must consider is that the UK property market is an international market, meaning it can be affected by geo-political events all over the world.

“Even if domestic demand cools, I think international demand will increase and the UK market will be affected because of it. I don’t think foreign investment will be overly deterred by the new rules coming in to place on 1 August.

“Property in the UK represents an exciting opportunity for foreign buyers because of the drop in the value of the pound.

“UK house prices continue to rise at a staggering rate domestically, being pushed higher by factors such as the influx of oversea investors. In the past, factors such as the stamp duty holiday have caused more people to consider buying property. However, due to the increase in average house prices, it has made it more difficult than ever for buyers to purchase their first property.

“There is hope that more available properties will enter the UK housing market and the latest House Price Index shows an increase of 24% in the number of prospective sellers bringing homes to the market – thus causing a more manageable supply and demand level and potentially slowing the rapid rise of property prices.”

By EYE CORRESPONDENT

Source: Property Industry Eye

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Knight Frank: Scottish commercial property investment hits pre-pandemic levels in first half of 2022

Scottish commercial property enjoyed its best first half of the year for investment volumes since 2018 as the market continued its recovery from the Covid-19 pandemic, according to new analysis from Knight Frank.

The independent commercial property consultancy found that £1.2 billion of commercial property deals were agreed between January and June 2022, up 54% on the same period last year. The figure is also 21% ahead of the five-year average – albeit, this was skewed by low investment volumes during 2020 and, to a lesser degree, 2021.

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Overseas investors represented more than two-thirds (68%) of the total investment figure, equivalent to £843 million, with UK property companies the second most active buyers totalling £296m – 23.9% of overall investment volumes.

Investment in retail assets increased by more than 55% on 2021, rising from £148m to £230m with retail warehousing accounting for £165m of the total figure. Offices were the most popular asset class with £410m worth of deals, boosted by the sale of HFD Group’s 177 Bothwell Street in Glasgow, in what is believed to be a record transaction for Scotland.

Edinburgh saw £400m of investment, while Glasgow accounted for another £329m. Deal activity in Aberdeen continued to pick up, reaching £189m, largely from the sale of two retail warehousing assets.

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Alasdair Steele, head of Scotland commercial at Knight Frank, said: “The first half of the year has underlined a couple of key trends that have emerged over the last two years: retail warehousing and industrials remain in high demand, while prime offices are highly sought after – underlined by the deal for 177 Bothwell Street.

“Similarly, overseas investors accounting for such a high share of investment during the last six months also highlights the strength and depth of the buyer pool for Scottish commercial property.

“An uncertain macro-economic outlook will likely cool deal activity over the next couple of months. However, commercial property has typically acted as a hedge against inflation for investors and, with yields in Scotland’s main cities comparatively good value and supported by strong occupier markets, we expect interest to remain strong in the second half of the year.”

Source: Scottish Construction Now

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Foreign owners hold £90.7bn worth of property in the UK

Overseas nationals own almost 250,000 homes across England and Wales, the latest research by London lettings and estate agents Benham and Reeves shows.

In the current market, that is £90.7bn worth of property, suggesting that the UK remains a safe haven for foreign homeowners.

On a regional basis, London is home to the highest value of foreign owned homes, with the 85,451 properties belonging to overseas homeowners equating to a total value of £45.3bn.

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Westminster ranks top, with foreign owned homes commanding a current market value of £11.8bn, while in Kensington and Chelsea this total sits at £10.7bn.

Tower Hamlets ranks third, although some way off the top two, with overseas homeowners sitting on £3.7bn worth of property, followed by Wandsworth (£3.3bn) and Camden (£3.2bn).

Outside of the capital, Buckinghamshire is home to the highest value of foreign owned homes at £31.1bn, while Tandridge (£1.6bn), Liverpool (£1.4bn), Salford (£1.1bn) and Manchester (£1.1bn) also make the top 20 list.

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Director of Benham and Reeves, Marc von Grundherr, commented: “It’s not just domestic homeowners who have benefited from some extreme rates of house price appreciation in recent years and despite attempts to deter foreign interest, the value of homes owned by overseas buyers remains considerable, to say the least.

“While London is home to the highest concentration of foreign owned property market wealth, it’s certainly not confined to the boundaries of the capital alone, and overseas buyers remain an important segment of the market across England and Wales.”

By MARC DA SILVA

Source: Property Industry Eye

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UK Expat Buy-To-Let Mortgage Market Review

The UK expat buy-to-let market creates a busy news cycle. Liquid Expat Mortgages will often pick the most important headlines to break down.

The continued activity in the UK expat buy-to-let mortgage market is partly due to increased interest coming from Hong Kong as the political situation continues to evolve there.

Despite the rises in the base interest rate, interest rates are still relatively low by historic standards and many lenders are not increasing – or increasing only marginally – their rates for expat buyers, as the expat buy-to-let marketplace is particularly lucrative.

Zoopla which noted that the number of people looking for rental properties this year is 76% higher than the average number for the same time between 2018 and 2021.

In the ongoing race to get rental properties to an EPC rating of a C or higher, 17% of landlords have already attempted to improve the energy efficiency of their property, while 22% of portfolio investors have begun green renovations.

Liquid Expat Mortgages takes a look at the top headlines from recent news in the UK expat buy-to-let mortgage market.

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Activity in the expat buy-to-let and remortgage markets is similar to the high seen late on in 2021, indicating that expat business is not being dampened by the consistent interest rate rises.” — Stuart Marshall MANCHESTER, GREATER MANCHESTER, UK, June 29, 2022 /EINPresswire.com / —
As we move into the second half of June, Liquid Expat Mortgages takes a look at the top headlines from recent news in the UK expat and foreign national mortgage market.

Expat Buy-to-Let Market Remains Strong After Rate Rises.
Activity in the expat buy-to-let and remortgage markets is at a similar level to the high seen late on in 2021, indicating that expat business is not being dampened by the consistent interest rate rises coming from the Bank of England. This is, in part, due to increased interest coming from Hong Kong as the political situation continues to evolve there.

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Despite the rises in the base interest rate, interest rates are still relatively low by historic standards and many lenders are not increasing – or increasing only marginally – their rates for expat buyers, as the expat buy-to-let marketplace is particularly lucrative and competitive. Further, there are still many interested buyers as the UK property market remains an attractive investment option offering a relatively stable asset class.

‘Anecdotally, this is something we’ve been seeing’ says Stuart Marshall. ‘The UK expat and foreign national buy-to-let mortgage market is very busy at the minute. Many UK expat and foreign national investors are benefitting from uncertainty in the domestic marketplace that is being caused by the consistent base rate rises. This is currently acting as a deterrent for domestic buyers and meaning less competition for UK expat and foreign national buyers. This means that properties are staying on the market longer and prices are coming down faster. There is also a more competitive rental market since fewer people are graduating to home ownership. This means UK expat and foreign national buy-to-let mortgage holders are seeing higher profits as competition in the rental market pushes up prices.’

Sky High Confidence Indicating a Profitable Marketplace.
In Shawbrook’s Changing Face of Buy-to-Let Report, it was revealed that 67% of landlords are confident about buy-to-let in 2022. It also showed that 34% of landlords are planning another buy-to-let property purchase in 2022. This is another indicator that expat buy-to-let is thriving despite the recent rate rises. This is largely due to rising rents contributing to greater profits, slightly dampened house prices in the UK and enticing yields. There is also an increased desire or necessity for those in the rental market to continue renting, with the survey showing that only half of renters expect to leave the rental sector in the next fifteen years, while 13% of renters are committed to long-term renting.

The increasing number of people in the rental market is also shown in a recent report by Zoopla which noted that the number of people looking for rental properties this year is 76% higher than the average number for the same time between 2018 and 2021 . Aside from the difficult market conditions, this could also be partly due to the number of young people leaving their parents’ homes and returning to the city centre post-pandemic.

As noted above, the difficult domestic conditions are creating a fertile investment landscape for those using UK expat and foreign national mortgage products. Consequently, buyer confidence is high among UK expats and foreign nationals. ‘This is likely to increase as forced sales start to bite in the marketplace too’ says Stuart Marshall. ‘Smaller salaried homeowners with larger mortgages are in a precarious position with the interest rate rises and are facing the real possibility of negative equity amidst falling house prices. Forced sales are inevitable with the way the market is currently poised. This will only lead to a higher number of properties available in a slower marketplace, meaning that investors will be able to utilise UK expat and foreign national mortgage products to secure a fantastic investment property at a reduced price.’

Another thing to note from Shawbrook’s report is that 29% of brokers said that three quarters of the portfolio investors they were dealing with were considering opening limited companies for their buy-to-let ventures. ‘This is continuing a trend that has emerged in recent years’ says Stuart Marshall. ‘With an increasing number of legislative changes for landlords, there are many good incentives for UK expats and foreign nationals to incorporate their investment properties in limited companies. A good broker will be able to help with this.’

Green Buy-to-Let Mortgages at a Record High.
In the ongoing race to get rental properties to an EPC rating of a C or higher, 17% of landlords have already attempted to improve the energy efficiency of their property, while 22% of portfolio investors have begun green renovations. The most popular renovations were new windows and new boilers, with 23% and 22% of those improving their property’s energy efficiency conducting these renovations respectively.

Stephanie Charman, head of strategic relationships at Sesame Bankhall Group, estimates that the cost of improving the EPC rating of a property will range between £5,900 and £10,400. ‘This is obviously a significant cost to landlords’ says Stuart Marshall. ‘However, discerning investors are talking to expert brokers and finding ways to minimise the cost of these renovations. One such way is to remortgage – which has proven very popular amongst the UK expat and foreign national investor population – and use some equity from the property to finance green renovations, especially with the chancellor’s new discount to green technology.

This is also a good strategy to take as the number of green mortgage products continues to grow, with 19% of all buy-to-let products now green mortgage products . These products offer discounted rates to UK expat and foreign national investors who commit to green renovations or purchase environmentally friendly properties. This can be an incredibly fruitful strategy in the current marketplace as both environmentally-conscious and cost-conscious consumers are looking to rent properties with higher EPC ratings.’

Source: MENAFN