EDUCATIONAL
Can foreigners buy property in the UK?
September 13, 2024 • Author: George Radford
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Can foreigners buy in UK? In short – yes, absolutely. The UK property market remains one of the most popular locations for foreigners – or non UK residents – to buy property and markets like London rely on foreign investors buying property.
Many foreigners invest in UK real estate for the stability of the market, potential for capital appreciation, rental income opportunities and for family members studying or working in the UK. However, there are several important considerations and steps to keep in mind.
Key Considerations for Foreign Buyers investing in UK investment property
We break down eligibility, interest rates, and the documents required for a smooth property purchase in this explainer of how the mortgage process work for overseas investors.
Financing the Purchase
Foreign buyers can access mortgages in the UK, but the process might be more complex than for domestic buyers. Lenders may require a larger deposit (often around 25-40% of the property value) and higher interest rates. Some international buyers opt to finance the purchase through overseas banks or cash. RPA works with specialist lenders who lend exclusively to overseas property investors and non-UK residents, securing the most advantageous finance for our clients.
Legal Requirements
RPA can refer you to specialist and experienced property lawyers who deal exclusively with international UK property investors to make your transaction as smooth as possible. Foreign buyers must comply with the same legal procedures as UK residents, including:
• Conveyancing
Hiring a solicitor or licensed conveyancer to handle the legal aspects of the property purchase.
• Due Diligence
Conducting property searches and surveys to uncover any issues with the property or its title. This is much easier when buying newbuild and off-plan property as any issues are dealt with in the snagging process before hand over. Unsure what snagging is? Read our glossary of UK property terms.
• Stamp Duty Land Tax (SDLT)
Paying the applicable stamp duty on property purchases. Note that an additional 2% SDLT surcharge applies to non-UK residents buying residential property.
Tax Implications
Foreign property owners are subject to UK taxes, including:
• Income Tax
On rental income, if the property is let out.
• Capital Gains Tax (CGT)
On the profit from the sale of UK property. Non-residents are liable for CGT on residential properties sold after April 2015 and commercial properties sold after April 2019.
• Inheritance Tax
On UK property, which may be applicable if the property is passed on after the owner’s death.
Again, we work with specialist tax advisors who appraise our clients of the best way to negotiate UK property taxes.
Currency Exchange
Fluctuations in currency exchange rates can impact the cost of buying property in the UK. It's advisable to consult with a currency exchange specialist to manage this risk effectively. Timing the currency markets well can result in a huge financial gain – or effectively a discount on purchase price – when buying in the UK.
Ongoing Costs
Foreign buyers should budget for ongoing costs such as:
• Council Tax
A local tax on residential properties that is usually the responsibility of the tenant, but during void periods will fall to the landlord.
• Maintenance and Repairs
Regular upkeep of the property. RPA works with a trusted and specialist lettings and management provider who provide an exclusive service for overseas property investors and professional landlords, taking care of any maintenance issues responsibly and fairly.
• Property Management Fees
If the property is let out, especially for those not residing in the UK, it’s crucial to appoint a good managing agent. Without one, your asset will depreciate.
Eight Steps to Buying Property in the UK as a Foreigner
1
Research and Planning
Identify the type of property you want, the location, and your budget. Research market trends and legal requirements – or speak to us!
2
Engage Professionals
We can hire you a solicitor, mortgage broker and our team will guide you through the process from start to finish.
3
Get Mortgage Pre-Approval
This is crucial to establish the viability and profitability of your investment. We encourage all of our clients to obtain a pre-approval to understand how much they can borrow.
4
Find a Property
We’ll present our clients with a range of investment opportunities suited to their budget and investment goals and we’ll negotiate on your behalf with the developer.
5
Conduct Due Diligence
Once your offer is accepted, your solicitor will perform legal checks, property searches, and coordinate a survey. RPA already conducts extensive due diligence on all our investment opportunities for the protection and peace of mind of our clients. We also encourage our clients to do their own research.
6
Exchange Contracts
When all checks are satisfactory, exchange contracts and pay the deposit. This makes the purchase legally binding.
7
Completion
On the agreed completion date, pay the remaining purchase price, and take possession of the property.
8
Instruct a lettings and management agency
Our clients want an investment that runs itself, which is why we work with a specialist lettings agency who deal exclusively with overseas investors, managing our client properties to a high standard on their behalf.
conclusion
Buying property in the UK as a foreigner is relatively straightforward but it requires careful planning and adherence to legal and financial regulations. Engaging with knowledgeable professionals, understanding the tax implications, and being mindful of financing options will help ensure a smooth transaction.
The co-founders of RPA have been advising a global client base on UK property acquisitions for over 20 years. Dedicated agents, dealing exclusively with overseas property investors, RPA source the best London and UK property investment opportunities and have helped hundreds of clients to build high-performing UK property portfolios.
Get in touch today to see how we can help you to begin building your UK property portfolio.
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About the author
George is the co-founder of RPA Group and Managing Director of the business in the UK and Africa. A qualified Chartered Surveyor (MRICS) with almost 20 years of property investment experience, George has helped his clients to successfully grow and strengthen residential property portfolios over multiple markets and territories.
Managing Director
