Buying Real Estate in the UK

One of the best ways to invest money is to buy property in the UK. Real estate prices in London remain high amid world crises protecting the owners from worrying during market fluctuations.

If you want to stand on your own two feet, such an investment will give you exactly what you need: confidence in the future for you and your children.

Renting Out or Moving In?

People buy property for various reasons. It can be a regular and stable income from real estate in London while you live elsewhere. Such income will adjust with time and allow you to maintain the same lifestyle regardless of the circumstances.

However, there are lots of people who want to work in London and need a place to live. Before you start looking, research transport and social infrastructure in various areas, and think about what view from the window you want and who your neighbours will be. Do you care where they come from? Remember that there are good and troubled neighbourhoods. English is one of the more than 300 languages spoken in London daily.

Properties range from tiny studio flats to spacious family apartments, from “second-hand” properties to new builds. The latter tends to come as a white box with interior design left to your choice.

Rental Income: Location, Location, Location

How sought-after your property will be and how much you will get paid for it depends on its location. West London is known as a place where the well-to-do live. There are more cafes, bars, designer shops, and fantastic infrastructure, including schools, nurseries, clinics, and educational and entertainment hubs. The quality of life there is higher than in East London. It is a comfortable, safe, and convenient place to live, so a rental price of a residential or commercial property can be higher and continues to grow.

East London is highly multicultural with a predominantly foreign population coming from all over the world. There are, however, some deprived areas that you need to be aware of.

Another tip for you. When choosing where to buy in the UK, look for cultural and historic landmarks. Beautiful views and busy shopping streets will attract more tenants. If you buy a place in a central location, you can make about 10% profit on resale.

Belgravia, Chelsea, Kensington, and a few other areas are the most popular. A property there will cost you millions of pounds, but it will pay off quickly.

Here are what property prices per square meter roughly look like: £4,000 to £6,000 in East London, £8,000 to £13,000 in West London, and £15,000 to £18,000 on the traditionally more expensive Thames Embankment. Central London is another world altogether – it goes for £20,000 and more per square meter.

Leasehold vs Freehold

There are two types of property ownership in London. Freehold is when you buy a dwelling and the land it rests on. Leasehold is when you get a long-term lease on a dwelling only, for up to 99 years; the land belongs to someone else. It is possible to switch between them. Before making a choice, discuss it thoroughly with your advisor; they will find you the best property deal in the UK based on your specific circumstances and goals.

New Build and Off-Plan

Like in many other countries, the UK legislation allows developers to sell real estate off plan, i.e. when it is still under construction. Such property is not only great because it’s built to modern standards but also because you can benefit from price increases. Before it’s even completed, it can be going up in price by 10% per year. A bonus is a ten-year insurance cover offered by the National House Building Council.

To strike a deal, you must pay in advance 10-30% of the current price of the property. The remaining amount as well as taxes are paid when you get the keys.

The UK offers great mortgages with up to 70% of the purchase price available to borrow and a relatively low annual interest rate.

Before a deal can be signed due diligence checks and checks of the source of funds must be carried out to ensure that the money you use to buy a property is from legitimate sources. Besides, British financial institutions are prepared to give foreigners only buy-to-let mortgages. They guarantee a regular stable income, which would ensure interest rates and charges are paid to the financial institutions.

Investment Value in Numbers

London sticks to the moderate policy, making the UK economy less affected by world crises than its European neighbours. Land for construction is strictly regulated; this contributes to the market deficit and makes real estate investment even more attractive.

The Nationwide has run research over a ten-year period (ended in 2019). The research papers present the statistics showing an inflation of 60% in real estate prices. This figure is expected to be 11.5% up within the next five years – when it comes to selling property. If we are talking about renting it out, the profit will amount to 7% per year on average.

Property Acquisition Procedure

Anyone looking to gain from selling their London property might find themselves a real estate agent. They would, for a fee, use all their resources and connections to find a buyer and prepare the necessary paperwork. Once all the details are discussed and included in a contract, the parties sign it, pay taxes, and the title passes to the buyer. Remember that it is not always necessary to pay the entire price straight away. As a rule, you will put a deposit down when the contract is signed, and the rest is paid when all the paperwork is complete.

Legal representatives of both parties provide legal support for the real estate deal: check all the paperwork for the title transfer and background information including all kinds of reports from public authorities, for example, regarding electricity supply. They will also be responsible for the money transfer. The buyer transfers the necessary amount to acquire the property and pay all the taxes and fees to their legal representative. When the deal is signed, the latter transfers the sale amount to the seller’s rep and pays all relevant fees and taxes.

Taxes

Three taxes must be paid when selling or buying a property in the UK:

1. Stamp Duty Land Tax (SDLT)
2. Value Added Tax (VAT)
3. Income Tax (paid by the seller).

Your legal representatives will make sure these taxes are paid on time. When is the deadline? Thirty days after the contract is signed. The payable fee depends on the type of property and the legal status of the buyer (an individual or a legal entity). The Stamp Duty Land Tax is fixed; you can ask your legal advisor about it.

If you sell real estate, you must also pay income tax regardless of your tax residency. If, in addition, you let a property out, your rental income will be taxed as well.

Legal entities buying real estate must pay corporation tax. We recommend consulting your advisors about the tax rate beforehand.

Another UK property-related tax is the inheritance tax. It is mandatory, so make sure you take it into account.

Professional assistance

If you don’t have relevant knowledge and experience in buying property in the UK, you might come across a few problems and even lose money.

Experienced real estate agents with an in-depth understanding of London boroughs and real estate lawyers with the knowledge of relevant laws and regulations will save you time and stress.