Property investment in the UK

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With property prices rising globally, real estate in the UK remains an attractive option for international investors looking to diversify their portfolios. This guide covers key factors foreign buyers should consider when investing in the British property market and especially London.

How buying in the UK is different to the rest of the world

The UK property market has some key differences compared to other countries that foreign investors should understand. 

Property is freehold

In the UK, over 90% of properties are sold on a freehold basis, meaning the land and building are owned indefinitely. This differs greatly from China, where land ownership is restricted to 70-year leases due to communist ideals of collective ownership.

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There are few restrictions for non-uk residents

The UK recently raised stamp duty tax for non-resident buyers to 5%, while residents pay less than 1% on purchases under ¬£500,000. But policies remain open compared to Singapore, where foreign buyers face 20% in additional buyer’s stamp duty for instance.¬†

In this sense, the property market is very much open to international investors.

What an open property market means

The UK enables international buyers to purchase property similar to locals if financing is secured. In contrast, in Australia foreign investors cannot purchase existing homes, only new constructions. In this sense, it is easy to see how investing in the UK is considerably easier.

Where are the best deals for intending buyers?

Cozee always ensures there are deals on the market available to our investors in London. By just visiting our properties for sale on our website you can view what kind of bespoke opportunities are available and get on the phone with someone from the Cozee team today.

Looking for a good deal?

Cozee help investors find good deals in London with low risk and small fees

You can buy property as a company 

UK companies face 20% tax on property investment profits, versus 45% income tax rates for individual buyers. However, in Canada, tax rates for corporations and individuals are similar, reducing this benefit and incentivising property purchased for investment in the UK. 

How tax is differs from buying in a personal name

There are some key differences between purchasing property in a company name versus personal name in the UK:

  • Tax implications – Buying in a company means the property is owned by the company, so any profits/gains are subject to corporation tax. Personal ownership means capital gains tax for any profits when sold.
  • Financing – Getting a mortgage on a personally owned property is generally easier than company owned, especially for small/new companies. Companies may need a larger deposit.
  • Legal ownership – Property legally belongs to the company, not an individual. Shares in the company can be transferred more easily than selling a personally owned asset.
  • Limited liability – With a company purchase there is more legal protection if things go wrong. Personal owners are more exposed to losses.
  • Stamp duty – Generally lower for companies, as commercial property stamp duty rates apply. There are some anti-avoidance rules however.

Bulletproof property regulations

The UK has some of the strictest property laws and financial oversight in the world. These regulations protect property investors by ensuring transparency, preventing fraud, and creating a fair system. The robust framework applies equally to international investors looking to purchase UK property.

Anti-money laundering 

Verifying source of funds is critical to prevent illicit financing in property transactions. UK solicitors are legally required to perform thorough due diligence on property buyers and the funds being used for purchase. 

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This applies to cash purchases, mortgages, and any method of payment. Ongoing monitoring also occurs after purchase to detect suspicious transactions. These anti-money laundering regulations ensure property is not being used to launder criminal proceeds.

Land registry 

All property ownership in the UK is registered and records are accessible by the public in the Land Registry. This land registry enhances transparency in property transactions, as it shows who legally owns a property. Having an open database prevents secret sales or illegal transfers of ownership. 

It also facilitates due diligence by solicitors and lenders. They can verify true ownership prior to finalising purchases and funding. This land registry gives confidence to buyers that the seller legally holds the title being transferred.

Financial Conduct Authority (FCA) 

The FCA found here, is an independent regulatory agency that oversees financial services firms and monitors for misconduct. All UK mortgage lenders and property professionals like solicitors fall under FCA regulation. 

The FCA requires these firms to follow strict anti-fraud and money laundering rules. Violations result in heavy fines. Knowing industry professionals are monitored by the FCA prevents predatory business practices that could endanger buyers. It reduces the risk of being defrauded when investing in UK housing.

Data protection 

Privacy has become a major asset for property buyers ‚Äď especially high-profile or at-risk investors. Strict UK data protection laws prevent unauthorised access to or sharing of buyers‚Äô personal information. Read more about General Data Protection Regulation using this link.

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Property records may show ownership details, but sources of funds and buyers’ identities remain protected. This confidentiality can provide peace of mind to overseas investors concerned about exposure of their finances and purchase activity.

Tax compliance 

Mechanisms like stamp duty make tax evasion very difficult when buying UK property. Attempts to under-value homes for lower taxes are restricted by independent property surveys. 

And stamp duty must be paid up front in order to register ownership, creating inherent compliance. This ensures all buyers pay their fair share of taxes. There are no ‚Äúloopholes‚ÄĚ for foreign investors to exploit. With few options to circumvent taxes, the UK system promotes payment of proper taxes on property.

How the Russia-Ukraine war impacts property regulations

In response to the Russia-Ukraine war, the UK has imposed prohibitions on citizens and companies investing in Russian assets, including:

  • Ban on direct acquisitions of Russian land or property companies. Applies to both residents and non-residents.
  • Restrictions on providing loans and transferable securities to Russia. Limits financing options.
  • Asset freezes on Russian banks, corporations, and high net worth individuals. Removes investment targets.
  • Suspension of certain Russian securities from UK markets. Closes off key investment channels.

These regulations aim to limit the flow of UK capital into Russia, applying not just to oligarchs but standard investors as well. The government continues monitoring transactions for violations.

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Now you know how it works, where do you start if you are buying a property in the UK?

As an international investor looking to purchase property in the UK, securing financing can be tricky compared to local buyers. Traditional high street lenders often have strict criteria that excludes non-UK residents but there are still ways to invest if you have the right capital. 

However, working with a private lender that specialises in mortgages for international buyers or even using an off-shore mortgage can open up more options and ensure you are paying the right amount of tax based on the income you make abroad and in the UK. This tax split is called the remittance basis and you can find more about it here.

Getting a mortgage as an international investor

As a foreign investor looking to get a mortgage in the UK, you will likely need to provide certain documents to demonstrate your financial situation and ability to repay the loan. Key documents private lenders may require include:

  • Proof of income – Pay slips, bank statements, tax returns, or profit and loss statements showing regular income. Documents should cover the last 3-6 months.

  • Proof of deposit – Bank statements or investment portfolio summaries proving you have the minimum deposit amount.

  • ID documents – Passport, driver’s licence, or other government-issued ID verifying your identity.

  • Visa/residency documents – If applicable, proof of your right to live and work in the UK as a foreign citizen.

  • Credit report – Documents indicating your credit history and score, which lenders will evaluate. This can be done by going to a credit union like Experian here.
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Having these documents ready will help streamline the mortgage application process with a private lender. Be sure to ask what specific materials they require early on. Promptly providing the necessary paperwork gets you one step closer to financing your UK property investment.

Who to trust with your investment if you are not a UK resident

When it comes to finding someone to trust with your investments, they need to be:

  • Reputable
  • Knowledgable
  • Experienced
  • Transparent

Looking to invest somewhere trustworthy?

Work with the international investor experts at Cozee Properties with over 20 years of experience

How Cozee can help you with new build property

Cozee have many new builds for sale in the London area. What is great about new build property is that they are brand new and the tenants living in them are likely to afford higher rents.

As a result, not only do you get to benefit from a high rental yield, you also get to benefit from a large capital appreciation as new property built in London where there is a finite amount of land available is likely to increase the price of property.

Buying as a Chinese investor

Chinese buyers make up a sizable portion of foreign property investment in the UK. This section covers top considerations for Chinese investors looking to purchase property in Britain.

The difference between the chinese and british property market

The UK and Chinese property markets have some key differences that Chinese buyers should understand before investing in British property.

Tax

The overall tax burden for property owners is lower in the UK compared to China. For instance, the UK stamp duty land tax on purchases tops out at 12% for properties over £1.5 million. 

In contrast, China has transfer fees and transaction taxes that combined can reach over 30%. Capital gains taxes on property sales are also lower in the UK at 28% for higher rate taxpayers, versus over 40% in China. The lower tax rates can enhance net returns for Chinese investors.

Freehold rather than leasehold

Most property in the UK is sold on a freehold basis, meaning the land and building are owned indefinitely. This differs from China where land ownership is restricted to 70-year leases. Foreigners cannot legally own land in China. 

While lease terms can be extended, freehold ownership provides greater control and asset stability for Chinese buyers investing in the UK market.

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Political and economic stability

The UK property market benefits from greater political and economic stability compared to China. Established regulations create transparency in UK transactions. 

While still subject to market forces, the UK property market sees less volatility overall than China’s, which faces greater capital controls and policy shifts from the central government. Chinese buyers can take comfort from the UK’s stability when looking to preserve wealth.

Can you buy property if you only speak mandarin?

For Chinese buyers looking to invest in the UK market, speak to Jenny at Cozee Properties. 

As a native Mandarin speaker, Jenny expertly guides Chinese clients through UK purchases end-to-end. Contact her today to discuss your UK investment goals!

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