As expats ourselves, we really do understand the temptation to sit on cash right now. However, for those with a reasonable amount of capital and confidence in their job security, there are a number of reasons why this is probably the best time to invest in UK property in a decade.
The last few years have seen new challenges for UK property investors, from changes to the tax regime to the global pandemic which is dominating our lives. Whilst it may seem counter-intuitive, a number of factors have combined to make now the best investment opportunity we may see for many years. Some have contributed to the current UK mini-boom in buy to let, one is unique to the expat investor.
Low interest rates
With the onset of the pandemic, the Bank of England cut it's base rate to 0.1%, where it has remained since. This has encouraged lenders to offer exceptionally low buy to let mortgage rates
Equally, holding money on deposit earns less now than it has ever done. After taking inflation into account, depositors are seeing the real value of their savings fall month after month.
Ready mortgage availability
In times of uncertainty, banks err on the side of caution. This has been bad news for first time buyers with increased deposit requirements and the introduction of new restrictions.
Conversely, banks are keen to lend to buy to let investors. Deposit requirements have always been higher than for owner occupiers and investment properties are seen as lower risk as they are income producing.
Stamp duty reductions
In July 2020, the government announced a temporary reduction in Stamp Duty, reducing the amount payable to 3% for buy to let investors.
This will end on 31st March 2021. At the same time, an additional 2% surcharge will be introduced for overseas investors. Substantial savings are available to expats who complete their purchases before then.
Low value of Sterling
Sterling has been in decline for many years, but has been particularly pronounced since the Brexit referendum.
By way of example, these are typical savings in Hong Kong Dollars and Emirati Dirham since June 2016 on a UK property at a purchase price of £150,000.
Exchange rates from www.xe.com
Growing and stable long term returns
According to major industry experts such as JLL, Knight Frank and Savills, house prices are likely to remain largely stable for the rest of this year and during 2021. Thereafter, their opinions only differ in how much and how fast property values will rise.
International investors have always regarded UK property as a safe haven investment in a stable political environment. Despite the current health and economic difficulties, there is no reason to suppose that this outlook will change.
Low interest rates. Easy mortgages. Cheap Sterling. Reduced Tax. Normally, an investor might be happy to see any one of these. Delighted with two. To have all four at the same time may be unique.