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Buying Property in UK for Foreigners- Guide for 2022

Foreign investors have long looked to the UK as a solid destination to invest in property. So in this article, you’ll find out all the ins and outs of buying a property in the UK for foreigners. 

Despite uncertainties presented by COVID-19 and Brexit, overseas investors from around the world remain optimistic and continue to show interest in the UK market.

Regions across the country offer strong potential for capital appreciation as well as rental income, and high demand, a shortfall in supply, strong yields and attractive prices is keeping the UK on the map as an international investment hotspot. While the end of the stamp duty holiday in 2021 (which also applied to overseas investors) may deter some, a strong market performance, future growth prospects and the pound at a historic low, means that investing in a UK property still has many advantages.

Let’s take a look at what makes the UK an appealing property investment destination and give you answers to some of the key questions foreign investors may have before buying an investment property anywhere in the UK

Is Buying Property in the UK a Good Investment?

In the recent past, The UK experienced a drop in the real estate market and many areas are presenting lower-than-usual property prices where savvy investors can make substantial gains. At the same time, the housing market forecast looks good. In 2021, Savilles announced: “With house price growth at 10.4%, 2021 was the strongest calendar year for price growth since before the Global Financial Crisis (GFC) in 2008.”

a 4% market growth, and by 2025, property prices are predicted to rise by 21.1%, with certain areas experiencing an even greater increase.

If you want to know what 2022 has in store for the UK property market, check out our Housing Market Predictions for 2022 

While UK property prices remain relatively affordable, foreign investors should be mindful that property rates can be quite high in certain locations. However, more expensive areas tend to present higher rent revenues and the potential for the property price to increase. 

It’s important to have a thorough understanding of the UK property market landscape before making any investment decisions. Here you’ll find more practical tips for UK property Investment.


Buying a Buy-to-let Property in the UK as a Foreigner

When it comes to investing in a buy-to-let property, one of the main factors foreign investors will want to consider is the rental yields. Many cities offer lucrative buy-to-let options that present investors with opportunities to make high returns. 

Across the UK, 25 postcodes boast rental yields of over 6%, and Liverpool is one of the cities in England with the highest number of lucrative buy-to-let postcodes. For more information, read our guide on investing in property in Liverpool. 

If Liverpool simply doesn’t tickle your fancy, we’ve got you covered with our article on Best Buy-to-Let Areas in the UK, such as: 

  • Manchester
  • Nottingham
  • Leeds
  • Bradford
  • And Liverpool

Can a non-UK citizen buy property in the UK?

There are no restrictions on non-British citizens buying property in the UK, and it is not a requirement to be a British citizen to buy a house. At the same time, you may wonder whether you can buy a property in the UK and get citizenship. Unlike some other countries, buying a residential property in the UK will not result in residency or citizenship.

Although there are some notable considerations to keep in mind:

  • Getting a mortgage is not as easy
  • You might have to put down a hefty deposit
  • It would be more hassle-free if you’re a cash buyer
  • More stringent documentation will probably apply to you

Keep on reading to get more in-depth info on the possible hurdles and setbacks of buying property in the UK as a foreigner.

Can Foreigners Buy Property in the UK and Get a Mortgage?

While the UK property market is open to foreign investors, those not resident in the UK may face difficulties qualifying for a mortgage or large loan as most mortgage lenders will not lend to non-UK residents. With fewer financing options, foreign investors that can make a cash purchase may find the process easier.

For foreign investors that manage to take out a UK mortgage, a deposit of between 5-40% of the property cost usually applies. Mortgages also come with additional fees such as arrangement and booking and valuation fees, which can add several thousand pounds to the purchase.

Even though an evaluation survey will be carried out by your mortgage lender, we’d advise you also to get one of your own so you’d know if any possible repair & maintenance costs await down the line.

Should Foreign Investors Consider a Leasehold or Freehold Property?

When exploring the UK housing market, foreign investors should take note of whether the property is leasehold or freehold

Leasehold means the investor doesn’t own the building or grounds, which often applies to flats or apartments. Leasehold is generally a good option for foreign investors in the UK because property ownership comes with less responsibility and damage repair costs, should there be an issue. 

For freeholders, any damage to the property is their responsibility since they own the building itself and the land.

Can Foreigners Buy Student Rental Properties in the UK?

Can Foreigners Buy Student Rental Properties in the UK?

Foreigners looking to invest in a buy-to-let property should be aware of the two main types of properties that can be rented in the UK:

  1. student properties 
  2. residential properties. 

On the whole, student properties tend to be cheaper to purchase than residential properties, but this will depend on the area. To help you find the right area, we’ve prepared this article –Best Areas for Student Accommodation Investment in 2022

As a foreign investor in the UK property market, the type of buy-to-let property you focus on will depend on the tenant market you wish to access. The UK has a thriving student market, particularly in cities and university towns, and students often pay higher rent than residential tenants. 

However, there tend to be more upfront costs such as wear and tear and renovation costs to make sure the property meets legal requirements. If you’re wondering whether student property is a good investment, read our guide to investing in student property in the UK.

Does the UK Stamp Duty Apply to Foreign Investors?

When investing in a UK property, foreign investors should bear in mind that upfront costs, taxes and fees will apply in addition to the property price. As of 1 April 2021, a new stamp duty charge for non-UK residents applies. With the aim to bring down property prices, this 2% stamp duty charge is on top of the existing rate of tax and calculated on the value of the property.

However, if the overseas investor is a first-time buyer in the UK, they can qualify for a first-time buyer tax rate – if the property value is less than £300,000, the buyer will just have to pay the 2% surcharge.

Do Foreign Investors Need to Pay Capital Gains Tax on a UK Property?

Do Foreign Investors Need to Pay Capital Gains Tax on a UK Property?

Foreign investors buying a property will have to pay capital gains tax upon the sale of the asset. While this may not apply to foreign investors for a few years, the Capital Gains tax is based on the growth in value of the house from the purchase price.

As of April 6th 2020, you need to report, pay and submit a non-resident CGT (Capital Gains Tax) return on:

  • Residential UK property or land
  • Non-residential Uk property or land
  • Mixed-use property or land
  • Rights to assets that have at least 75% of their value from UK land

Does Rental Income Tax Apply to Overseas Investors in UK Property?

For foreign buyers purchasing a buy-to-let UK property, a rental income tax applies to any rental income the property generates. The percentage applies to the amount generated, usually to be paid at the end of the tax year.

If you’d like more professional guidance on landlord tax in the UK, you might find this article useful.

Other Considerations and Costs for Overseas Buyers Investing in the UK Market

Conduct Proper Due Diligence

For overseas property investors that may not be living in the UK, it’s important to undertake proper due diligence before making any property investment. Foreign inventors should fully research the property market – which has regional variations – the company and developer behind the property or project and obtain a survey on the property if applicable.

Investors who are unable or unprepared to travel to view investment properties in person can purchase their buy-to-let property virtually. As a result of the COVID-19 pandemic and national lockdowns across the UK, more property investment companies have such processes in place, giving foreign investors the opportunity to make virtual tours and undertake the purchase of a property remotely.

Hire a Solicitor

When purchasing any property, it is usual to employ a solicitor who will provide assistance with the legal elements of the investment, including due diligence, researching any legal issues concerning the property, ordering a survey to ensure there are no structural issues with the property and generally ensuring the investment process runs smoothly.

In addition, a solicitor will require the relevant proof of identity documents in order to comply with money laundering regulations before supplying a foreign investor with a purchase contract, leasehold agreement and completion statement, which details the amount of money required to complete the property purchase.

Work with a Property Management Company

If investing in a buy-to-let property, property management companies can assist with the day-to-day duties involved with owning a rental property such as finding tenants, responding to tenant problems and queries and ensuring the property creates consistent rental income. Property management companies usually charge a percentage of the rental income as their fee.

If you’re a foreigner wondering whether you can buy a property in the UK, it’s certainly possible and with relatively low prices, future growth prospects and potential for strong rental yields and capital gains, investing in the UK housing market presents many advantages. To find out more about purchasing a property in the UK as an overseas buyer, get in touch today.