The uncertainty surrounding the future of the UK’s economy and property market following the territory’s departure from the European Union may suggest that investing in property here might not be a sound move at this point in time. However, this may, in fact, be far from the truth.
There are a number of reasons why now may actually be the best time to consider the UK as a location for the expansion of your overseas real estate portfolio.
In this article, the team at Property Solvers – specialists in selling homes fast – look into the opportunities available to US real estate investors within the UK property market and offer tips on where to begin.
Why Invest in UK Property?
For such a small country, the UK is extremely diverse in terms of culture and landscape.
The urban sprawl of London is a lucrative place for landlords, with plenty of opportunity for those wishing to invest in buy to let properties for young professionals.
The beautiful Lake District, on the other hand, is ideal if you’re planning to create holiday lets or procure a holiday home that can be used as an Airbnb.
There are also a number of hidden gems across other regions such as Northern Ireland, Scotland, and Wales.
The UK is an exceptionally popular destination for foreign nationals seeking work in its cities or education at one of its numerous superb universities.
Additionally, when it comes to UK natives, rental culture is huge.
Buy to let properties will always be in demand, whether they are new builds or repurposed dwellings. City centers are exceptionally popular, but there are also opportunities galore in affluent rural beauty spots.
Where Is Best to Invest?
Greater London
As we have previously mentioned, London is a hugely popular location for rental property and Airbnbs, with supply constantly struggling to meet the extreme demand.
Property in the capital is expensive to obtain, but if you can find a house or flat in a popular location with good public transport links (a massive percentage of London’s population commute by underground train or bus), it’s likely that you’ll make a great return on investment.
Some of the most popular rental spots include Canary Wharf, Paddington, Lambeth, Islington, and Camden.
The Regions
Rural beauty spots such as the Lake District or Derbyshire are great for holidaymakers, as are sunny southern seaside locations like Brighton or Penzance. Purchasing property to let out as an Airbnb or short-term rental will mean that the summer months are particularly lucrative.
Types of UK Property
There are a variety of types of property you may consider in the UK. Detached houses tend to command higher prices and are relatively popular for both sale and rent.
Semi-detached (two houses together with space or driveway either side) and terraced houses a row of conjoined properties) are a little more common. It’s likely that you’ll find more of these for rent than you will detached houses, but they are commonly available for sale too.
Semi-detached houses are usually more affordable than detached properties (depending on their condition), and terraced properties are often cheaper still.
As an investor, you may decide to purchase a good-sized house and divide it into flats. This is a particularly popular option for buy to let buildings in cities.
Bungalows that come up for sale are another popular option. They are affordable single-story properties that often come with a good amount of land, allowing investors to extend if they wish. They are particularly popular among the older community due to their lack of stairs and easy upkeep.
Flats and apartments are common in the UK, particularly in built-up areas. Studio flats or apartments usually consist of one room containing a sleeping space, kitchenette, and sitting area, with a separate bathroom.
Two-bedroom flats are probably the most common, but one-bed, three-bed, and others are also regularly available.
The cost to buy or rent flats and apartments varies considerably depending on their location, amenities, number of bedrooms, state of repair, and other factors besides.
When purchasing flats, especially in leasehold properties, it’s crucial to understand the terms of the lease and the potential costs of extending it. Utilizing a leasehold extension calculator can help you estimate these costs and better plan your investment.
UK Property Prices
The cost of UK property – both to buy and rent – varies considerably between regions. The average rent in Central London stands at a substantial £1,665 per calendar month ($2,133.75 at the time of writing).
By contrast, a typical area in the northern city of Manchester will see rental costs of just over £1,000 per calendar month ($1,281.53).
Northern Irish properties tend to set the inhabitants back just over £670 per month ($858.63), with similar average prices for rentals in Scotland. Welsh rental property is among the most affordable, with the average current sitting at just £634 per month ($812.49).
In terms of purchasing property, the average house in Central London costs a considerable £1,236,999 ($1,585,251.33). In Manchester, it’s much lower at £192,949 ($247,269.93).
Buying an investment property in Northern Ireland will cost you an average of £144,053 ($184,608.24), in Scotland, it will typically be £183,557 ($235,233.80) and a standard property in Wales is £182,072 ($233,330.73).
How to Purchase UK Property
Remember that as a foreign national, it can be very difficult to obtain a mortgage in the UK. For this reason, it’s best to have all the necessary capital to hand before you enter discussions with estate agents.
Estate agents take the place of realtors and real estate agents in the UK.
Instead of having a single agent working on your behalf to seek out suitable properties, you’ll often need to do the leg work yourself and inform the relevant estate agent of any properties on their books in which you are interested.
They will then communicate with the seller, their solicitor and your own legal representative in order to reach an agreement regarding pricing and to get all paperwork completed.
It’s best to have a UK-based lawyer working for you as you navigate this process.
What About Brexit?
As we mentioned at the start, the UK has entered rather uncertain times politically. Because this leaves both the immediate and long term future of the economy somewhat foggy, its current effect has been a slowing and “stagnation” of the housing market.
It also means that the UK pound is currently weak against the American dollar.
The result of this is that at present, property investors will get more for their money. Furthermore, once an agreement is reached regarding the UK’s departure from Europe, there is the distinct possibility of the economy picking up again – though we can’t be sure of a timescale.
This offers the potential for a greater return on your investment in a popular location for both natives and foreign nationals and both residents and holidaymakers.
The Risks
The main risk inherent in purchasing UK property at this present time is that the result of the Brexit process will prompt a market crash. Of course, periods of recession are regularly followed by a boom, but it will be difficult to predict how long this will take to come to fruition.
For the sake of your financial security, it may be worth ensuring that you can afford to “hold onto” your property should it become difficult to sell in a time of financial crisis.
This may mean that you take the time to renovate it and improve its value in preparation for an improvement in the market.
This article has been contributed by Ruban Selvanayagam.