As a world-leading city, being the fifth largest economy with a stable political structure, an excellent healthcare system, job opportunities and a buoyant property market, London has long been a safe place for property investment. Even following the effects of Brexit, the largest disruption in the UK’s economy for many years, and the impact of the Covid-19 pandemic, London’s property market continued to show growth. Read about the surge in Hong Kong buyers to the UK.
On Wednesday 28 April at 1pm (BST), Daniel Harrington, our host and Head of Growth – London & International at Fine & Country, was joined by award-winning London-based agent and CEO of Fine & Country Turnham Green Terrace, Ben Madden, to discuss the property purchasing process in London as a UK or an international investor. In the one-hour discussion, we were taken through the buoyancy of the London property market over the past four years, key information about the current UK tax incentive, the best times to invest in a property and a range of investment opportunities.
Whether you are looking to invest or relocate, playback the webinar to discover everything you need to know about buying property in London.
WATCH THE WEBINAR
Overview of London and the property market
The overall UK property market has been experiencing strange market activity over the past five years. Brexit has played a major part in politics. Looking four years prior to the pandemic, the UK voted to leave the EU, a process that has taken four years and has taken its toll on the property market. Uncertainty and concerns had led to a flat market for the past few years, however, the effects of the pandemic, partnered with the end of the Brexit saga, allowed the property market to get back into gear.
The Government called upon estate agency to improve the economy during 2020 and estate agency remained open throughout the pandemic. Lifestyle changes dictated consumer behaviour and, coming out of lockdown, many buyers’ lifestyles had altered. People no longer needed to be close to the office or in the city and consumers began looking for additional space for a home office, outside space, green views and great internet connections to fulfil the needs of their new lifestyle.
The housing market has been very buoyant in the last 10 months across the UK. Typically, London and the South West drives the property market for the rest of the UK. London became less attractive during the second half of 2020, whilst the south of England became very active. Now, the activity in the market is back. Plenty of home movers were tempted by the country lifestyle while they were stuck in their homes, but now people want to move back to the lively and sociable office. City-based offices want to see their employees in the office and the market will continue to see the recent country-life trend reversing over the next 12 months.
The effect on house prices in London
Whilst the rest of the UK has seen busy activity in the market, statistics from Zoopla point out that over the last six months London’s annual house price increase was two percent. Even with less activity in the market, London price growth is always going to perform well. Other cities, such as Birmingham, have seen price increases of over six percent. With the London market predicted to catch up with other cities soon, there is great opportunity to invest in property now and see it mature well in the long term. For someone looking to invest in London, whether you want to sit on a property, become a landlord with a buy-to-let investment or investing for your future, there is great potential for growth.
VIEW THE LATEST LONDON MARKET REPORT
The rental market
The rental market absolutely plays a part in the sales market. Pricing of rental properties in London is down by about 15 percent in central London and about five-to-10 percent in the London suburb areas. Lower rental prices create opportunity for investors looking for a buy-to-let investment.
With the introduction of a new 95 percent mortgage scheme, there will be more competition within the first time buy-to-let market, so we might see that pricing is likely to start to improve. The changes in lifestyle, with people looking for gardens and plenty of space, takes demand away from apartments, which is affecting current prices. In certain areas, there is an oversupply of apartments, which means there are great deals on apartments due to the supply and demand ratio.
“In my entire career of estate agency I have never seen such a strong opportunity to invest in such a great asset”
- Ben Madden, CEO of Fine & Country Turnham Green Terrace
Looking at the investment now is a short-sighted approach. A great indicator of a good investment is to look at what other investors are doing. It is predicted that up to 80 percent of buy-to-let investors will reinvest in the property market again in the next four years. The vaccine rollout in the UK is going exceptionally well and is certainly an area of optimism. As the effects of the pandemic continue to improve, the world will open for business again and international students will return to London. The market will see a spring back of demand and increase in prices.
Selling premium property on a global scale, 40 percent of Fine & Country’s transactions were with international buyers investing in the UK, with many of them purchasing properties without visiting them. International buyers will always view London as an excellent proposition. The city of London offers an infrastructure that not many cities can match, top schooling and universities, and it is widely regarded as the financial epicentre of the world. London is always a strong proposition in terms of GDP, currency fluctuation and growth. Even during the pandemic, London still showed a two percent growth.
Buying London property from abroad
The purchasing process
The usual method of finding and purchasing a property in the UK is through an estate agent or a buying agent who offer local expertise, tailor a property search to your specifications, arrange viewings and offer advice on the costs and buying procedures. An estate agent is instructed by the homeowner to sell their property. Whilst the estate agent is working in the best interest of the seller, international buyers can engage a buying agency service or a reputable estate agent, who will work ethically to ensure buyers are treated fairly and properties are presented accurately.
Before you begin searching for a property, you should have an estimate of your finances, considering all the costs and whether you will need a mortgage, to understand what you can afford. Fully understanding your finances ahead of time will prevent unnecessary delays or fall-throughs when it is time to buy.
Once you have found a suitable property, here are the steps you will take when purchasing a property in London:
• Making an offer – in the UK an offer can be made above or below the asking price and is not legally binding until the contracts have been exchanged. When an offer has been accepted, it is possible for another buyer’s offer to be accepted – this is called ‘gazumping’.
• Hiring a solicitor/conveyancer – a solicitor carries out the legal work and represents you during the purchasing process.
• Survey of the property – if you get a mortgage, a mortgage lender will arrange a valuation survey to assess the true value of the property. Buyers also may want to arrange a survey on the property to assess the condition before making the purchase.
• Finalising the offer – depending on whether there are issues from the surveys, the offer can either be finalised or renegotiated at this stage.
• Exchanging contracts – the seller’s solicitor will send the contract to you and your solicitor for review and signing.
• Completing the sale – Upon completion of contracts, the keys and property are handed over.
• Once the contract is signed, the money for the property is transferred and you will then have to pay any outstanding fees related to the sale.
How long does the purchasing process take?
Timescales for purchasing a property can vary. When purchasing a property in the UK, there are a number of components that can affect the speed of a sale, such as the time it takes for a surveyor to complete necessary legal documentation or the amount of time it takes for a buyer to arrange their finances. A good estate agent manages the various parts of the sale effectively between the buyer and the seller to ensure everyone is communicating effectively to move the process along and prevent any delays.
A Fine & Country agent can ensure a sale is completed within four weeks with a cash buyer, however, the process can take up to six months when someone has instructed a solicitor with many clients. Before instructing a solicitor, seek a recommendation from your trusted estate agent and always ask, “how quickly can you work on my case?”
Costs of buying property in the UK
When purchasing a property, you will need a solicitor, also known as a conveyancer, to represent you. How you will finance the purchase will need to be considered. As a cash buyer, there is not a lot to consider other than bringing your money into the UK, but if you need help financing the purchase, it is possible to obtain a mortgage (see ‘Securing a mortgage as a foreigner’ below). The costs associated with buying a home, depending on pricing and the purpose of the property, may include the following:
• Stamp Duty Land Tax – on property purchases over £125,000
• Income Tax – if you are a buy-to-let investor
• Non-resident tax – if you are a non-resident landlord
• Mortgage costs – including a deposit on the property, if you take out a mortgage
• Solicitor fees / legal fees
• Land registry fees – the cost of transferring the deed of a property to the new owner
• Removal costs – transferring your possessions into the UK
• Redecorating and furnishing the property
As an international buyer, you will not pay estate agency fees, but it is important to note, when moving to a new country, ensure you are working with a reputable estate agent or buying agent. Contact Fine & Country Turnham Green Terrace for information about their buying agent service or learn more here.
Securing a mortgage as a foreigner
If you need help with financing a property purchase, there are no legal restrictions on foreigners obtaining a mortgage and purchasing a property in the UK. Both resident and non-resident foreigners can get a mortgage, from a bank, building society, mortgage broker or independent financial advisor, taking into consideration a person’s age, income, job security and credit score. The mortgage provider will also consider the purpose of the property purchase, such as a buy-to-let investment, second home or a business property. Expats with less than two years of residency may face stricter policies and a larger deposit.
If you are a non-resident seeking advice on a mortgage, contact Fine & Country Turnham Green Terrace, who can introduce you to specialist lenders and advisors.
The new-build market
When purchasing a new-build property, the purchasing process may be slightly different. Usually a new-build development property is an off-market purchase. London is currently going through an exciting period of building new, high-quality properties.
A buyer can go directly to the developer, but Fine & Country would recommend going to the developer’s estate agent who can offer exclusivity, guidance and can negotiate between the developer and the buyer.
Once a sale has been agreed, the buyer pays a deposit, then the contracts must be exchanged within 28 days. The completion of the sale will not take place until the property is completely built. Depending on the development, the completion of the sale could be a few months to five years away.
Second-hand residential properties are more common for buyers to come by, buying directly from the homeowner rather than the developer. When the market is as buoyant as it is in London right now, home sellers create lock-in agreements. Simply, a lock-in agreement is the buyer and seller agreeing to see the sale through until the end. Often, the buyer will be asked to put down a non-refundable deposit of around five percent. A lock-in agreement is often used to protect both the buyer and seller, to prevent either party dropping out of the sale and to prevent a buyer being outbid and being gazumped.
Are you interested in selling or investing in London property or elsewhere in the UK and overseas? Find your local agent to get started today.
Learn more about how you can buy and invest in property elsewhere in the world with our previous Worldwide Wanderlust Webinars.