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2021 UK Property Market Outlook for Overseas Investors

Generally, the UK is considered to be a very good place for Property Investors seeking buy to let properties, but changes to regulations and the property market can affect whether it is the right time to buy UK property. Covid-19 and Brexit have had a big impact on the UK economy and the property market, so if you are a British Expat or Foreign Investor looking to buy property in the UK, you should find this information useful.

Are UK Property Prices Good Value?

Following the outbreak of Covid-19 the UK property market has experienced a big shift in house prices, with the market bouncing back after the UK’s first lockdown and reaching a record high for house prices. Indeed, UK House Prices grew at their fastest rate since 2015 in November and indeed this trend is expected to continue with a very promising start expected for beginning of 2021.

Of course, high prices are not ideal for property investors, however property experts are predicting prices to reduce over coming months. One significant factor in this will be that the stamp duty holiday introduced by the UK government will expire in March 2021.

When compared to other countries, the UK has a very good rental market, with a lot of demand for renting property. Interestingly, one of the big trends that emerged from post-lockdown property searches was that more people were looking to move away from the city, to quieter areas with more space.

Investment Opportunities for Overseas Landlords

From a property investment perspective, if people are moving out of the city and looking to buy property in the suburbs, this will potentially mean that more properties close to the city centres will go up for sale. Usually, these are the areas that property investors are looking to rent out, either for students attending the local universities or young professionals who work in the city. So, this could mean that once the house prices settle, more houses in the types of areas that are perfect for landlords would be available at good value.

The other big factor that will affect the UK property market is that mortgage lending criteria has become stricter due to the economic situation, which means those people who might have been looking to buy their own property might have to rent until the economy becomes more stable again. This of course, means that there are further opportunities for landlords, with rental demand remaining high for the foreseeable future.

Unemployment rates have been increasing throughout 2020 due to the health pandemic and the job market is looking increasingly challenging, especially with the government’s furlough scheme due to end in March, at which time companies may be forced to make redundancies. So, it is going to be harder for a lot of people to get their own residential mortgage than it would have been a year ago, before the impact of Covid-19 took hold.

Is a UK Property Crash Likely?

Initially, a lot of property experts were expecting a significant crash after the mini boom after lockdown, when sales started to go through again. The introduction of the stamp duty holiday has helped the property market to stay buoyant, with lots of sales going through but when the stamp duty holiday ends, sales are likely to slow down at this point.

However, with the Covid-19 vaccine having started to be rolled out, there is a more positive expectation for the property market for 2021 and beyond, so investing now should not see any drastic house value crashes. Property investment is most successful for those looking for long-term investments, so as long as there is the demand to live in rented properties, buying investment property in the UK is still very attractive opportunity right now.

Student Housing Demand

Landlords, and potential landlords, have been wary about the impact of Covid-19 on students applying courses and living in student housing. Perhaps surprisingly, there was an increase in the number of UCAS applications for undergraduate courses for the academic year of 2020/21.

When universities re-opened in September and October, the UK news was filled with updates regarding the high numbers of Covid-19 infections throughout the student population. Many students also complained about paying course fees when much of their course had to be delivered online.

Universities have been worrying about the impact on applications for the next academic year but with the vaccine expected to be available for the majority of the UK population before the new term, this should give students confidence in the university experience they will receive in the next academic year.

Another interesting factor regarding student applications is that there was a 9% increase in international student applications in 2020, as announced by UCAS. So, student applications were actually at an all-time high, despite the UK lockdown and with so many foreign students looking to study at UK universities, demand for student accommodation should remain high.

To find out more about how we can assist you with your Expat Mortgage requirements, please click here to get in touch

The impact of Brexit on students

There was a noticeable drop in EU undergraduates for 2020-21, which was largely attributed to the uncertainty of Brexit. As of 1 January 2021, students from the EU will require a study visa to attend a university in the UK, which could result in lower numbers of students coming from the EU this academic year. However, the numbers of students coming from China, India, the US, Hong Kong, Malaysia and many other non-EU countries has been rising in recent years.

This gives confidence to Overseas Landlords & Property Investors who are looking at renting property out to students and now that the vaccine has started to be rolled out to the UK population and also around the world, this should provide additional confidence that there will be a lot of demand for student accommodation for the foreseeable future. The UK remains a very attractive option for international students, with many UK universities having very good reputations around the world.

Demand for UK Rental Properties

We mentioned earlier that stricter lending criteria will be a barrier for many people who were hoping to get onto the property ladder in the near future. The UK mortgage industry had to adapt quickly to take into account the impact of furlough arrangements, where potential borrowers had their salary reduced by 20%.

Mortgage Lenders adjusted their criteria to manage the risks of furloughed workers not being able to afford their mortgage payments and also to try and mitigate the risk of many furloughed workers later being made redundant. 

Mortgage lenders have also had to provide payment holidays to their current mortgage holders, as directed to do by the government, so lenders have had a lot of new challenges to face in 2020 and are constantly working on setting out the best approach to lending criteria going forward.

The Bank of England revealed in August that the number of mortgage approvals in 2020 stood at 418,000 compared to 524,000 for the same period in the year previous. It is expected that the higher levels of unemployment and other economical factors in the UK will result in a reduction of approved mortgages in 2021.

This scenario can be advantageous for Expat & Foreign Property Investors because mortgage lenders will be looking to lend to applicants that are more likely to be able to afford to pay their mortgage. Unlike many industries such as hospitality that has been devasted by lockdown restrictions, property investors will often be deemed to be lower risk to lenders, as they have financial stability and different income streams.

UK Mortgages for Expat or Foreign Investors

While many mortgage lenders are tightening their lending criteria, using a Specialist Expat or Foreign Investor Mortgage Broker will help to find a good mortgage deal that will enable investors to expand their property portfolio in the UK.

Expat Mortgages UK are a whole-of-market broker that has access to every single mortgage deal on the market, which enables us to find our clients the best possible deal at the most attractive interest rate. Our experience and specialism in this sector also bring benefits such as working through the challenges of being a non-UK resident.

We work with a wide range of property investors from around the world and even if they have little or no UK credit history and their income is in foreign currency, we are still able to find the right mortgage solution to help them to succeed in buying UK investment or residential properties.

Foreign investors often struggle to obtain mortgages in the UK but at Expat Mortgages UK, we work with lenders who will take on this risk and we will help you to complete the application, so that it goes as smoothly as possible.

Our expertise will also help to ensure there are no unnecessary delays that can result in missing out on a property, so contact us today and we can get started on your foreign investor mortgage application.

To find out more about how we can assist you with your ExpatMortgage requirements, please click here to get in touch today.

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International investors clambering for UK property amidst global uncertainty

COVID-19 cases might be steadily decreasing, though this does not mean we have overcome all of the fundamental challenges posed by this global pandemic. Market uncertainty has made it difficult for investors to plan for the future. While it looks as though we are on the path to recovery, there is nothing to suggest a second spike in infections is completely off the table.

What’s more, we are only beginning to realise the economic ramifications of the coronavirus.

It seems as though the majority of the world’s major economies will stay in a recession for at least the rest of 2020. GDP levels in advanced economies are expected to remain around 3-4% lower than their pre-pandemic projections until at least 2025, according to a Fitch Ratings report.

As such, investors are seeking ways to hedge against this forecast by gravitating towards assets which have historically been able to deliver stable returns and quick recoveries from sudden downturns. In the UK, this has translated into an incredible spike in overseas demand for UK property.

Overseas interest in UK property

While housing in the UK has long-attracted international demand, previously it had mainly been concentrated in the capital; specifically, Prime Central London (PCL) property. However, recently, estate agencies are reporting a surge in interest from Hong Kong buyers in buy-to-let properties in the North of England.

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This is not to say that COVID-19 has damped international demand for London property. To the contrary, Beauchamp Estates recently reported that they had assisted with $374 million worth of investment into PCL housing from Chinese and Hong Kong residents between December 2019 and June 2020; representing 20% of all property transactions worth above £10 million in the capital.

Additionally, estate agent Dexters revealed that PCL sales for properties worth over £2 million between mid-June and mid-August were 85% higher than during the same period a year prior. This incredible uptick in demand demonstrates how UK property is seen as a safe and secure asset in times of uncertainty across the globe. Dexters also reported that the majority of these transactions were by cash buyers in Hong Kong, Singapore, the UAE, the US, Italy and India.

Why are overseas investors clambering for UK property?

As well as UK property’s historical positive performance, there are three additional benefits for international investors at present.

Firstly, the Stamp Duty Land Tax (SDLT) holiday on the first £500,000 on all property sales across England and Northern Ireland provides substantial discounts compared to previous years. Non-UK-resident buyers can now save as much as £15,000 in SDLT through this tax holiday.

Already, the tax break is having a noticeable impact on the housing market. The first national House Price Index to be released after the introduction of the SDLT holiday revealed an annual price growth of 1.5%.

Secondly, the SDLT overseas-buyer 2% surcharge is due to be implemented from April 2021. Acting now, before the above holiday ends and this additional added cost is introduced, allows for substantial SDLT savings.

Finally, the economic and financial stability of the UK provides many an escape from market volatility they may be experiencing in their own jurisdiction. London in particular is recognised as a global financial capital and bustling cosmopolitan centre, allowing buyers easy access to both further investment opportunities and the luxury lifestyle benefits the capital city can provide.

Property in a time of uncertainty

As 2020 continues and the COVID-19 pandemic plays out, it’s likely that the level of foreign buyer interest in UK property will continue to steadily increase. Overseas investors are becoming more aware of the prime property investment opportunities across the UK.

From a recovery standpoint, this influx of foreign capital is helping to reignite the property market, encouraging buyers and sellers who initially retreated following the introduction of lockdown measures to make a steady return. Supported by the SDLT holiday, this will be vital in supporting the UK’s post-pandemic economic recovery.

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