If you’re thinking of trying your hand at overseas property investment, the UK may provide some surprising opportunities.
At first glance, it may seem like a gamble to put money into the economy of a country that is currently embroiled in a struggle to leave the European Union, but in actual fact, now may actually be the best time.
Here, the team at Property Solvers – specialists in UK real estate and helping homeowners understand their real options when selling a home fast – will explain a little more about why investing in UK property may be a sensible move at the moment. We’ll also let you know how to get started.
The Current Climate
Due to uncertainties surrounding “Brexit”, the UK property market is relatively slow – as no trade deals have yet been arranged with Europe or the rest of the world. Property prices are stagnating, growth is sluggish and mortgage rates are low. This means it’s a good time to buy, but not yet a great time to sell.
Furthermore, the pound is low against the dollar at present – again, as a result of Brexit – so you’ll get more bang for your buck if you invest now.
If you’re thinking of flipping houses, the good news is that a slow period is often followed by a boom – so once the matter of leaving the European Union is suitably resolved, you may find that any property you purchased and renovated during the “slump” will gain extra value.
How to Invest in UK Property
UK property, in general, is relatively expensive compared to Canada and the States, and it’s not yet known how foreign investors will be taxed after Brexit. There are plans to impose further tariffs in the near future, but it’s not clear when – or if – these are likely to be brought into effect.
Mortgages or cash?
Securing a mortgage or loan as an overseas investor in the UK is extremely difficult compared to doing so as a resident, so cash buyers will find the process much more straightforward.
Where to invest
In general, property prices in the UK are fairly similar to those in Canada. However, London is very much an outlier, with the cost of both buying and renting considerably surpassing equivalents in Canada’s most expensive city, Vancouver.
Whether you’re flipping houses or buying to let, you’ll need to be extremely financially secure to invest in a London property – especially in high-end boroughs like Chelsea, Westminster and Camden. However, it will definitely be worth your while – as it’s not unusual for homes to sell for an excess of one million pounds (just over 1,693,170 CAD).
UK rental costs, too, are generally not too different from Canada’s – but in London, average rent hits around £1,745 per month (just over 2,954 CAD).
It’s important to note that as of September 2019, a new act of Parliament came into effect in the UK banning letting agents and landlords from charging their tenant’s certain types of fees. You can read more about this on the UK government’s website.
It’s important to understand the legalities and technicalities involved in purchasing property in the UK before you start to make plans regarding any investment.
UK property owners are subject to the second-highest rates in the developed world, following the US.
There are a number of different types of tax you may be subject to if you invest in UK property. Some of these may be familiar, but it’s a good idea to research each one – as there may be significant differences:
- Stamp Duty Land Tax
- Council Tax (if you rent a property out, this will be paid by your tenants)
- Capital Gains Tax
- Income Tax and National Insurance (for any amounts you make in rent)
- Inheritance Tax (if you decide to pass on any of your property to a friend or relative)
Recently, UK Capital Gains Tax has been extended to cover non-residents and foreign investors. There are also plans to add a 1% Stamp Duty Land Tax surcharge for foreign investors. Further information about this can be found here.
Larger Scale Investments
While Brexit’s effect on the property market and the strength of the pound has made it somewhat easier for overseas investors to make their mark on the UK property market, the same isn’t necessarily the case for those working on a larger scale.
There are a number of points to keep in mind if you are considering larger-scale property projects in the UK, especially if they involve construction. For example, contracting overseas firms or utilising imported materials may be something of a risk while the UK makes plans to leave the European Union.
The UK government has created a guide to getting ready for Brexit that includes information on the import and export of goods and materials as well as preparatory action that can be taken should you have professional dealings with firms based in Europe or further afield.
Looking through government-issued information will help you to avoid some of the pitfalls that may come with investing in new-build projects during the Brexit transition period.
It’s important to be aware that the UK’s property market may take some time to return to full speed following the country’s departure from the EU. There is also the risk of a “no deal Brexit”, which will possibly affect the number of buyers as a result of wage cuts and job losses.
In the worst case, you may find that you own property in the UK that you can’t sell on – or, should you begin construction on new homes or flats, there’s a risk that your contractors or suppliers may not be able to finish the job should they fall foul of post-Brexit legislation or cuts.
Of course, property investment has always been a gamble of one sort or another – and, with the pound weak against the dollar and market growth slow, it can be sensibly claimed that the benefits outweigh the risks when it comes to investing in UK property at this time.
The potential for a property boom once the terms of Brexit are confirmed is very real, so take the above information into consideration before you make your decision and the chances are that you’ll come out on top.
You may also be interested in: Investing in Rental Properties? Five Tips on Getting a Mortgage
Writer: Ruban SelvanayagamDisclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.