Offshore property investment offers you the opportunity to own a piece of the UK, Europe or other parts of the world. Owning property outside your country of residence can have many advantages, such as currency hedging, diversification, favourable interest rates and the opportunity to buy in areas where infrastructure is being renewed and improved.
The United Kingdom
The United Kingdom is world-renowned for its iconic historical landmarks, world-class tourism offerings and overall stability and infrastructure. Although the UK is not geographically very large, it has many thriving cities and is a powerhouse of the Western world, with a highly skilled workforce.
The UK has an extensive and established property offering, with a strong demand from foreigners seeking to benefit from low mortgage rates, high capital growth and sound leasing and management.
Types of property to invest in
There are many opportunities for property investment in the UK. The main investment types include, but are not limited to:
The process of buying a residential property with the intent to let it to residential tenants.
- Commercial property investment
These are investment opportunities in retail, leisure and restaurants, industrial and office spaces, student accommodation or social housing.
- Buying off-plan and buying off-market
The action of purchasing a new build before the development is complete.
Join Sable International, in partnership with API Global, to learn everything you need to know about property investment in the UK. Book your place at our seminar on 24 August at The Vineyard Hotel.
Best areas to invest in UK property
Foreign investors considering the UK as an option for offshore property investment should acquire property in an area with good yields, stable growth and high demand for housing and rentals. The UK has several centres of thriving commerce, well-established businesses and a strong investment property market.
Over time, London has attracted significant investment and demand remains high, despite concerns about the continuing rise in property prices. High rental demand is putting pressure on rentals and providing higher returns for investors.
Although this is the case, you can often find a higher total return if you are further from the centre of London. However, the security you receive and feel when buying a property in London can often outweigh the return. Some people, therefore, prefer to own a property in London, even if the rent is lower than what they could get for a property of the same value in another part of the UK because they have confidence in the London market.
Birmingham is the second largest city in the country after London and one of the most vibrant cities in the UK. Thanks to its growing population and infrastructure, it is becoming increasingly popular for foreign real estate investors.
The city’s thriving business scene has played a large part in its recent surge in popularity, which has created a desire for quality rental housing. Prime location and infrastructure development are contributing to the city’s strong economic and demographic growth, offering the potential for a high return on investment and steady rental income.
Manchester is another booming hotspot city that is attracting a lot of interest from those looking to invest in the UK property market. Although many foreign investors prefer London, the high cost of property and low yields mean that foreign investors do not get the maximum return from their investments.
Among other major corporations, the BBC has also moved its headquarters to Manchester. This, like Birmingham, opens up employment opportunities for many young professionals.
There is strong demand for home ownership and rental housing in both Birmingham and Manchester. In both of these cities you can purchase an entry-level new build property for around £200 000. This offers the investor the security of knowing that the property is in pristine condition. A new build also means that the developer is responsible for all necessary structural work and extensive maintenance, which can be a hassle-free solution. If you want to invest in a property, it is important that you set your costs for the next five to 10 years. This way you can be clear about your monthly costs and weigh them against the expected rental income and growth to understand your investment model.
Why the UK market is great for offshore investment
The UK remains one of the most popular markets in the world for property investment. Despite low interest rates and high demand, investing in the UK remains a reliable way to maximise returns because of the following five factors:
1. Confidence in the UK market
The demand for skilled labour and low unemployment make the country what it is: a powerhouse. The reputation of opportunity, stability and security provides the UK with an abundance of foreign investment as many seek to keep capital and assets in this financial centre.
2. Supply vs demand
As the population grows, so does the demand for housing. Demand for certain types of property in the UK significantly exceeds supply. This demand can be met by further construction, but properties in popular areas will remain in high demand as there are more buyers and renters at any given point.
The UK rental market is driven by a growing population. As property prices rise, many young professionals are looking to rent indefinitely. The UK’s low unemployment rates are evidence of a strong labour force. People with employment and a source of income serve as collateral for investors because the most important part of their investment is that the rent will be paid. Rent can only be paid if there are enough people in employment who are able to pay the rent. Rental yields in the UK reach up to 8% in prime cities. This leads to high returns on the sale of your investment.
Buy-to-let investments can generate short-term rental income if the income covers mortgage payments and costs such as general maintenance. Long-term gains can be generated through capital growth if the value of the property increases.
3. Regeneration and infrastructure upgrades
In the UK, regeneration is usually accompanied by investment in local infrastructure. Regeneration has been driven to enable growth and redevelop run-down areas. This includes improvements to housing, facades and roads to make UK towns and cities fit for more traffic. It also includes new transport links that will better connect the UK.
London’s transport system is one of the oldest and one of the largest in the world. As a result of the recent changes in infrastructure and the transport network, commuting from East London to West London now takes less than half the time it used to.
High Speed 2 (HS2) is a planned high-speed rail line in the UK, providing rail links between London and major cities in the Midlands and the north of England; the first phase is under construction. The HS2 line will connect the cities of London, Birmingham and Manchester and major airports among others. With a length of more than 3.4 km, it will also be the UK’s longest railway bridge and the country’s second purpose-built high-speed line.
Currently, Birmingham and London are better connected through the HS2 line.
This means that investors can now invest outside central London and still make a decent return, as the connectivity to central London is still very good and the transport costs are relatively cheap compared to travelling to London by long-distance train from outside the country. Previously, it took the same amount of time to travel by train from somewhere 200 miles away as it did from somewhere 20 miles away. Because of these changes in the country’s infrastructure, people can now live anywhere in the UK as they can afford to commute to London when needed. These regeneration and infrastructure changes are all driving the demand for property investment in the UK.
4. Favourable interest rates
The UK has a very established property market and interest rates remain low. These rates are significantly lower than in South Africa, and the cost of capital is still lower than inflation. Inflation is higher than interest rates in the UK and your rental yield is typically affected by inflation.
There are no legal restrictions on buying property in the UK. There are 87 types of lending accessible to foreign investors who wish to take out a mortgage. You can lock in an interest rate for a five-year term, which means that as an investor you can predict exactly how much your mortgage will cost for five years. This means that you know what your costs will be when you create your investment profile. Loan rates available at this rate are around 75% credit, 25% value depending on circumstances, but around 4% which can be fixed for five years. UK property offers stability so you can confidently use a mortgage to buy an offshore property.
5. Finite in size
The size of London is finite because it is only so big. There are only so many development opportunities because London’s size cannot be increased. This means that property prices will always hold because of the limited area. There is only one central London that will not change.
If you are considering investing in the UK property market, we can offer expert advice and representation. We can help you diversify your wealth through an offshore property portfolio using our comprehensive understanding of the worldwide property market.
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