The UK property market is one of the largest in the world. With an estimated annual value of $360 billion, it surpasses the highest Asian markets such as Singapore or Hong Kong’s, for example, by nearly 8 times, providing more and better opportunities to investors.
The UK property market consistently ranks among the top real estate markets for foreign investors due to several factors such as:
The U.K. has become the ideal place for Asian investors to consider diversifying their portfolios.
The property market keeps showing signs of recovery, as noticeable in recent consistent trend of house pricing increases, creating a promising opportunity for Asia-based investors looking to amplify their portfolios.
As banks gain confidence in controlling inflation, the outlook for interest rates has become more favorable, with the first rate cut already implemented by the Bank of England, and the prognosis for more reductions to come briefly after.
After a significant rise, mortgage rates in the UK have started to stabilize, with December 2023 marking the first decline in 23 months, as rates fell by 6 basis points to 5.28%. This stabilization has led to a boost in mortgage approvals, reaching 50,500 in December, the highest since June 2023, and helping to moderate the overall decline in home prices.
Like the Singapore and Hong Kong property markets, the UK property market is open and highly active, with minimal restrictions on foreign ownership, offering promising opportunities to Asia-based investors. However, there are some general key differences. Both operate on a system of combined leasehold and freehold properties, but due to the scarcity of land, Singapore real estate is made up of approximately 80% leasehold properties typically bound with a 99-year lease agreement. On the flip side, although leasehold properties make up just 20% of UK dwellings, leases typically range from minimally 150 years to even 999 years (the norm) leasehold. This makes the UK leasehold market enticing to those who wish to keep the property for multiple generations without holding a freehold asset.
Additionally, in the UK, an Asia-based investor will navigate through various fees and taxes, such as stamp duty (varying from 0% to 12%, depending on the transaction value, with an additional 2% for foreigners), Rental Income Tax or Capital Gains Tax, although, with the correct tax and investment planning, the impact of these taxes can be controlled.
A value trap is a property investment where the asset appears to be cheap and appearing to be attractively priced, but it’s actually a poor investment as its value is unlikely to improve in the medium-long term. In the UK, properties acquire value over time, while in certain countries in Asia, the property value decreases over the years, due to:
The robustness of tenant demand is important, as not only will this increase the value of property in the long term, it also makes it easier to service the mortgage payment for the property. As a general rule of thumb, look for properties with a tenant in place, and the rent you receive is higher than the mortgage payment.
A property in the UK, with strong tenant demand, high increasing rent, and shortage of housing, generally will produce a healthy return in the medium-long term, in the UK, over a medium-term, it will mostly remain profitable.
There are many benefits to investing in the UK property market as an international investor familiar with the Asian markets, here are some of the most important ones:
These are just some of the benefits of investing in the UK from Asian based investors in particular Singapore and Hong Kong, and there are many more besides this.
For buy-to-let investors seeking to diversify their portfolio, the UK offers higher yields against Asian property markets. A central-based property in the UK can offer yields of 6.5%, compared to 3.08% in Singapore or 1.88% in Hong Kong.
The latest Rental Index has shown a rise in rent for people looking for somewhere to live in 65 cities and large towns in the UK. 6 of the 10 biggest increases were in areas with relatively easy access to major cities like London, Manchester, Leeds and Cardiff. They also included Wigan, Newport, Bradford, Rochdale and Luton.
The mean average rental price for new lets, over a 3 year period between 2020 and 2023 has now increased to 30.7%, yet another record high for UK rents.
Buy-to-let Asia-based investors should consider diversifying into central cities, instead of the usual focus in London.
Asia-based investors looking to invest in the UK will benefit from an active, transparent, and stable market. Taxes will be similar to those on the Asian property market, but more favorable in many aspects.
The U.K. property market is an attractive and beneficial opportunity for Asian investors. Finding the help of expert professionals who can help you maximize your returns and tax efficiency by planning the right investment strategy for you can give you the orientation of how to take advantage of this dynamic market.
Contact Value Invest today to learn how to make a lucrative property investment in the UK.
–
–
Continue reading interesting articles:
Why You Should Invest in the Fast Growing London Commuter Belt of England
© 2024 VALUE INVEST ALL RIGHTS RESERVED
© 2024 VALUE INVEST
ALL RIGHTS RESERVED
