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UK Expat Buy-to-Let Investors Look North

In the search for higher returns, UK expat buy-to-let investors need to look beyond the capital to offset the impact of profit-eroding legislation.

Buy-to-let UK property has long been seen as a lucrative investment, often used to provide an inheritance for the investor’s children, as a pension alternative, or as an ancillary form of income. Buy-to-let investors are looking North. And UK expat buy-to-let investors need to be looking North too! There’s also been a clear growth in the number of buy-to-let landlords operating as a limited company compared to last year.

According to research from the BVA BDRC Landlord Panel for Q1 2021, this is the first time in over 4 years that a higher proportion of landlords are intending to expand their portfolio rather than reduce it (19% vs. 17%). The same research has also shown that 61% of landlords plan to use a buy-to-let mortgage to fund their next purchase and 29% of buy-to-let borrowers intend to remortgage in the next 12 months.

The Need for Higher Returns.

Due to legislative tax changes in the last few years, landlords are having to seek out areas that offer higher returns. In 2016, a 3% stamp duty surcharge was introduced for the purchase of second homes. In April 2020, it was announced that landlords could no longer claim mortgage interest as a tax expense. These changes have slowly eroded some of the profitability for UK expat and foreign national landlords. Despite this, landlord optimism in the near-term prospects for capital gains and rental yields has significantly increased year-on-year, by 26% and 24% respectively.

Landlords operating in London are most likely to have seen a fall in tenant demand in Q1 2020 and Q1 2021. So, where are UK expats and foreign national property buyers now looking? The answer is in so called ‘UK hotspots’ where higher returns offset the impact of the changing legislation and price entry points are a lot lower than some of the more traditional buy-to-let property areas.

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London Investors Looking Outside the Capital.

Between January and July 2021, 12% of UK property purchases were by investors. This was the highest since 2016 and is testament to the strength of UK property investment. ‘As a UK expat or overseas investor, it’s vital to see where investments are being made’ says Stuart Marshall. ‘Keeping track of these trends will help you to recognise where the most profitable areas will be when looking to invest.’

So, where should potential UK expat and overseas buy-to-let investors keep an eye on?

‘What’s really interesting to see’, continues Stuart Marshall, ‘is where the capital’s property investors are putting their money. 63% of homes bought by London-based property investors in 2021 have been bought outside the capital. This figure has been steadily rising for years – more than doubling from the 26% we saw ten years ago in 2011. The main driver for buying outside of London is obvious – the returns are higher elsewhere!’

Although a rental recovery is happening in the capital, it’s not enough to keep London-based investors there. Only 35% of investors who bought in London this year are seeing rental yields above 5%. Further, as of June 2021, rents in London were 16.5% lower than the same time a year ago, meaning investors who purchase in the capital are losing out on rental earnings. Though this has recovered from the 20.4% depression that we were seeing in April, it’s still not enough to keep UK expat and foreign national investors from looking elsewhere. For example, the average yield in cities across the rest of the UK is 6.2%. This figure is also the same for the average rental yield in areas outside of cities across the UK. So, London is falling far behind other areas of the UK and it’s forcing UK expat and foreign national investors to look elsewhere in the search for higher returns.

Where to Look for UK Expat and Foreign National Investors.

One area of interest, particularly when charting the behaviour of capital-based investors, is the North East. Here, landlords were responsible for almost a quarter of all purchases between January and July this year. ‘Both rental yields and capital growth in London are being far surpassed by Northern regions. And, increasingly, London’s investors are looking toward these areas for greater returns. For UK expats and foreign nationals looking to invest, taking note of this trend is important as it’s a strong indicator for where the best rental yields are going to be found. For example, in Middlesbrough and County Durham, London’s investors bought 28% and 25% of properties sold respectively in those areas in the last year. It’s clear to see why these areas have garnered such recent popularity with Middlesbrough and County Durham earning yields of 9.2% and 9.6% respectively.’

North West.

The North West continues to perform strongly when it comes to buy-to-let property investment. Though the average rental yield in the North West is currently lower than the North East – 7.8% compared to 9.1% – the North West is still a consistent favourite for UK expat and foreign national investors. ‘This may be to do with the incredible regional growth that we see in the North West’ muses Stuart Marshall. ‘In fact, the North West has the highest level of regional growth of anywhere in the UK. Regional growth in the last year has reached almost 12% in the North West, compared to the North East’s 9%. So, many UK expat and foreign national investors are favouring the North West because, in effect, you’re earning twice on your investment – once from the rental yield and once from the capital growth. As always, the best thing to do when looking to take out a UK expat buy-to-let mortgage is to talk to a specialist who can help to point you in the right direction and navigate some of the pitfalls.’

Source: EIN News

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Foreign investment drives rise in real estate deals

Overseas investors significantly contributed to a sharp rise in investment in Scottish commercial property in the first half, according to analysis from Knight Frank.

There was a 35% surge in deals to £688 million in the six months to the end of June, against £510m in the same period of 2020 – the height of the UK’s first lockdown.

Overseas investors have remained the biggest buyers of Scottish commercial property so far in 2021, making acquisitions totalling more than £300m.

Privately held property companies were involved in £115m of deals, while UK institutions accounted for another £60m.

According to Knight Frank, investment fell 15% between the first and second quarters of 2021, from £371m to £317m.

However, this does not include deals with undisclosed values, such as the sale of Neptune Energy’s Aberdeen headquarters in May – the biggest investment deal in the city since the pandemic began.

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Colliers’ Scotland’s snapshot for the second quarter of 2021 puts second quarter deals higher than the first – at more than £400m – though it says investment was about 20% below the five-year quarterly average of £528m, as the effects of the Covid-19 continue to be felt.

It says investment volumes over the first half were up by more than 50% on the same time in 2020.

Colliers says the four largest office deals in the second quarter were all recorded in Edinburgh, led by Rockstar Games buying its 75,000 sq ft building on Holyrood Road – the former headquarters of The Scotsman newspaper – for £31m, and the adjoining Holyrood Park House, home to Citigroup, for £17m.

Knight Frank lists alternatives and mixed-use schemes as the most popular asset classes in terms of investment volumes – including the £80m of funding for Moda’s Holland Park build-to-rent development in Glasgow – followed by offices and industrials.

Both agencies predict that, with a range of high-quality stock still being marketed, a flurry of deals could complete after the summer.

Alasdair Steele, head of Scotland commercial at Knight Frank, said: “Scotland’s commercial property investment market is still recovering from the effects of the pandemic, but there are signs we are heading in the right direction as the economy re-opens.

Oliver Kolodseike, Deputy UK Chief Economist, Research and Forecasting, at Colliers, said: “There is pent-up capital waiting to be deployed in Scotland. A number of deals are currently under offer and should complete in the coming weeks and months.

“We expect a further boost with remaining restrictions due to be eased in Scotland on 9 August and we should return to some form of normality.”

In the office market, Colliers expects a strong rebound in the second half of the year as lockdown restrictions ease further. In one of the largest leasing deals of the second quarter, BT signed a pre-let for 80,000 sq ft at Dundee’s West Marketgait scheme.

Elliot Cassels, director, national capital markets in Edinburgh, added: “There has been strong investor demand for Edinburgh offices, with keen prices having been paid. Footfall in city centres still remains low and investor appetite thin for high street retail and leisure.”

In the retail sector, which has been hard hit by the fallout from Covid, around £60m was invested in the second quarter.

Although this was double the first-quarter figure, it is less than half the five-year average of £130m. The largest retail deal was the sale of a B&Q warehouse in East Kilbride to an American real estate investment trust for £19m.

The industrial sector saw £70m invested in the second quarter, against £52m in Q1, and about 10% above the five-year quarterly average of £62m. The largest deal was DataVita’s acquisition of the Fortis data centre at Strathclyde Business Park for £45m.

By Terry Murden

Source: Daily Business

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Rising numbers of expats and foreign buyers eye UK property market’s opportunities

Mortgage brokers, banks and property market professionals have reported rising interest from foreign buyers and expats looking to snap up homes here in the UK.

UK nationals living or working abroad and foreign investors from the US, Canada and East Asian countries are cashing on a weaker pound, a price slump in London’s new-build market and renewed confidence in the UK’s economy and vaccine programme.

Meanwhile political turbulence in China and the UK government’s new Visa scheme, open to holders of British National Overseas (BNO) passports in Hong Kong giving citizens the chance to relocate, has also driven up overseas interest in UK property.

Since the start of the year, bank’s say they have seen foreign income mortgage business rise.

Skipton International reported a trebling of mortgage completions from Hong Kong residents purchasing buy-to-let properties in the first quarter of 2021. Furthermore, between January to May the bank saw a 34 per cent increase in enquiries from residents in the EU compared to August to December 2020.

For Hong Kong buyers, both London and the South East of England were the most popular locations closely followed by the North West and Midlands.

Roger Hughes, Skipton International’s business development manager, said investors saw the UK as a “solid and stable jurisdiction”.

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Mortgage brokers have also reported more interest from overseas buyers.

Richard Campo said between March and April he saw a 137 per cent rise in enquiries about foreign income mortgages.

“We noticed a huge spike in enquiries from buyers living abroad wanting more information about getting a mortgage supported by foreign income, way above what we have seen elsewhere in the business,” he said.

“It’s logical as lockdown restrictions ease and pent up demand is released coupled with the vaccine roll-out going well. What’s interesting though is that they are not super-high-end buyers. We’re seeing a lot of expats and new buyers looking around the £500,000 mark.”

East Asian interest

New-build snagging and property management firm BuildScan said in May it saw an 18 per cent year-on-year rise in enquiries from East Asian buyers who had recently purchased new-build properties in London.

According to the firm’s analysis, the impact of a weaker pound and lower new-build property prices dampened by the pandemic offered opportunities for East Asian investors.

Between January 2020 and December, the health crisis caused new-build property prices in the Capital to fall by 3.4 per cent to £488,371.

But fluctuating exchange rates meant South Korean homebuyers would have benefitted from a 6.8 per cent fall in prices when compared to the average price at the start of the year. Chinese buyers saw a 6.2 per cent drop and Japanese buyers a decline of 5.6 per cent.

Homebuyers from Thailand, Malaysia and Hong Kong would have secured smaller discounts of between 0.9 per cent and 1.8 per cent.

Harry Yates, founder and managing director of BuildScan, said: “Despite the problems posed by the pandemic, we’ve continued to see a high degree of interest in the London market from East Asia.

“This has been driven, in part, by factors such as BNO visa availability for those relocating from Hong Kong, as well as the opportunity to cash in on a stamp duty saving.

“Fluctuating exchange rates have also boosted the affordability of London new-build homes which has also caused many savvy investors to act sooner rather than later. Although the pound has rallied of late, the London market remains an area of focus for many foreign buyers.”

Oxford estate agent Wallers has also reported a rise in enquiries in non-European overseas buyers over the past six to nine months, particularly from the Far East. He also noted a significant proportion of the enquiries were from families from Hong Kong who want to relocate to a different part of the world because of political troubles.

He added: “We have also seen more enquiries than normal from buyers in the USA and Canada, and there has been a sense that they are seeing the UK in more attractive terms now that it is out of the EU, which has been contrary to my own preconceived ideas about what Brexit might do to our property market.”

Safe bet

David Baker said his firm was being contacted by UK nationals who work or live overseas in the US and Dubai and they want to buy in the UK either for a family member or to rent it out. He is also seeing interest around the £500,000 price point. They have also had enquiries from British citizens working in Paris and Germany.

“We’re seeing lots of business from people not paid in sterling who want to buy in the UK,” said Baker. “I’m doing more of this type of business than ever before.

“The feeling is that the UK is a good place to have your money, and London is a safe bet.”

Baker said while there was a lot of interest in houses with gardens, he was seeing a gradual shift towards flats, which fell out of favour during the height of the pandemic.

He added: “Buyers are seeing the potential for deals to be had because they are not as popular as they once were. And those who are buying to rent out aren’t as concerned about garden space.”

By Samantha Partington

Source: Mortgage Solutions

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London will remain “extremely attractive” despite 2% SDLT surcharge

Non-UK residents are now required to pay a 2% Stamp Duty Land Tax (SDLT) surcharge, but demand in Central London is unlikely to dampen.

UK resident companies that are controlled by non-UK residents may be required to pay, and the surcharge applies to freehold and leasehold purchases and on rents on the grant of a new lease.

The implementation will also see buyers who intend to live in the property required to pay the surcharge.

Under the new guidelines, individual buyers can have the surcharge refunded if they are in the UK for at least 183 days during any continuous 365-day period within two years referenced by the date of transaction.

Harry Buchanan said: “Despite the introduction of the additional stamp duty surcharge for foreign buyers today, we expect prime central London to remain an extremely attractive prospect for international buyers.

“In fact, we anticipate many more overseas buyers will return to the market once international travel restrictions are lifted.

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“We therefore expect demand to remain strong going forward, especially as the UK continues to roll out one of the world’s fastest vaccination programmes, which will boost economic activity in the coming months.

“We are already starting to see pent up demand from overseas buyers starting to build. Over the past two months, numbers of buyers visiting our website from the UAE have increased by 31%, while website searches from Hong Kong have gone up 33%.

“In particular, more buyers from Hong Kong are getting in touch following the UK’s offer of an easier path to citizenship for Hongkongers with British National (Overseas) passports.

“These buyers are specifically looking to become owner occupiers, and are particularly keen to be close to good schooling.

“The increasing demand we are seeing gives us a strong indication that interest in prime central London will continue to be high, especially for turn key properties that can double up as a lock and leave which we know tend to be most sought after by foreign buyers, as well as properties close to transport hubs.”

By Jake Carter

Source: Mortgage Introducer

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Where overseas investors own most properties

The London boroughs of Westminster, Kensington & Chelsea and Camden are some of the most popular with foreign owners.

Pure Property Finance analysed data from the Land Registry on overseas companies that own property in England and Wales.

There were 10,938 in the City of Westminster, 5,847 in Kensington and Chelsea, and 2,363 in Camden.

In terms of areas outside London, 1,770 were in Manchester and 1,516 were in Liverpool.

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Ben Lloyd, managing director of Pure Property Finance, said: “Since we set up Pure in 2013, we have worked with clients across the UK and abroad to secure bespoke property finance that suits their specific project needs.

“In this time, we have definitely seen some ‘hotspots’ for investment, particularly in London and the South East, along the M4 corridor, as well as cities in the North West.

“Some of these areas are now becoming oversaturated and do not provide the opportunities they once did. However, others remain in high demand; high value locations will almost always hold their value and bring a solid long-term return on investment.”

Overseas investors will be charged a stamp duty surcharge of 2% from April next year.

BY RYAN BEMBRIDGE

Source: Property Wire

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Benham and Reeves: Foreign buyers should invest in UK property now

With the temporary changes to the stamp duty threshold in place until March 2021, and a 2% surcharge for foreign buyers set to come in from April, now is the time for overseas buyers to invest in UK property, according to Benham and Reeves.

The current stamp duty holiday means that foreign buyers are able to save £14,573 on the average London property purchase.

The April 2021 surcharge will take the average the cost of stamp duty up to £38,579.

For foreign buyers making their move now, this means an additional £24,006 saved in addition to the sum already wiped off by the stamp duty holiday.

Kensington and Chelsea offers the most significant additional saving for foreign buyers transacting at the moment; the cost of stamp duty on a current purchase has reduced from £125,243 to £110,243, a saving of £15,000.

Come April next year, this stamp duty requirement will climb to £153,165 with the additional foreign buyer surcharge, so international buyers transacting before this are saving a further £42,922.

Similarly, foreign buyers looking to buy in Westminster can save £36,699 by transacting now, while Camden (£32,621), Hammersmith and Fulham (£29,943) and Hackney (£27,773) were also found to offer some of the best savings.

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In the last year, house prices in the City of London have fallen by £60,868 on average; combined with the £30,851 stamp duty saving made by buying now, foreign buyers would be £91,720 better off on average at present.

In Brent, a £28,463 reduction in property prices coupled with a £21,287 stamp duty saving means that foreign buyers would be £49,750 better off buying now.

Richmond has also seen property prices decline by £12,875 in the last year; with the addition of a stamp duty saving of £27,670 ahead of April’s surcharge, foreign buyers would be £40,545 better off on average as a result of buying now.

Marc von Grundherr, director of Benham and Reeves, said: “The recently implemented stamp duty holiday has not only rejuvenated domestic buyer demand, but we’re also seeing foreign buyers starting to return to the capital in their numbers. In fact, the vast majority of our buyer interest coming from Asia has only been concerned with homes falling under the £500,000 threshold.

“This has been intensified due to the sour taste of a two per cent stamp duty surcharge on the horizon as the government continues to dampen what is a vital sector of the London property market.

“In any case, the stamp duty savings currently on offer have been heavily bolstered by the additional saving made in comparison to buying from April next year and this has caused an immediate uplift in buyer demand from foreign shores.

“Great news for developers who with stock currently, or due to hit the market in the coming months.

“What’s more, some boroughs have seen property prices reduce over the last year and so foreign buyers are not only able to save considerably where stamp duty is concerned, but they’re securing even better value in terms of the price of the property itself.

“London remains the pinnacle of homeownership for many foreign buyers, and while a ramped-up level of stamp duty will be hard to swallow, it certainly won’t deter buyers in London’s high-end market.

“However, with many rushing to make the most of the savings currently on offer, any negative price trends that have plagued the capital in the last 12 months are sure to be short-lived as demand starts to outweigh supply.”

By Jessica Bird

Source: Mortgage Introducer