Foreign buyers have increased their interest in UK property, particularly in London, and are aiming to buy before the extra stamp duty tax for additional homes is introduced in April.
But there has been a change in the origin of these buyers with fewer Chinese and Russian buyers and more interest from Arab countries such as the United Arab Emirates and Iran as well as from British expats living abroad.
With Russians facing financial scrutiny at home and Chinese spending power significantly reduced, there has been an exodus of investors from the East, according to a new report from Banda Property.
But with the lifting of economic sanctions on Iran, Banda is already seeing enquiries from newly liquid Iranian investors seeking a safe haven for their cash. The firm says that they are likely to be drawn to traditional period houses in prime areas such as Kensington, Chelsea and Mayfair, as well as ‘lock up and leave’ apartments for their children to live in while they study.
Banda has also seen strong interest from European buyers since the start of the year, particularly Italians seeking to buy multiple investment properties before the April deadline for changes to stamp duty. They are attracted to areas such as Bayswater and Paddington where they can secure more square footage for their money with yields of 3% to 3.5% and good capital growth prospects.
‘Many wealthy Iranian families already have strong connections with London, so it feels familiar to them. There are concerns that the lifting of sanctions could be reversed, so we are likely to see people looking to move their money out fairly quickly,’ said Louisa Brodie, head of search and acquisitions at Banda Property.
‘Despite general scaremongering, we are seeing little evidence of a waning in London’s popularity among overseas property investors. It is still the number one destination globally and where Russians and Chinese buyers are withdrawing as a result of external forces, other investors are quickly plugging the gap,’ she added.
Meanwhile, the deVere Group reports a rise in interest from buyers from the United Arab Emirates and Qatar who are also seeking to beat the stamp duty surcharge.
‘More than 70% of all enquiries at deVere Mortgages come from foreign nationals or Britons living and working abroad,’ said Kevin White, head of distribution at deVere United Kingdom.
‘The overwhelming majority of these individuals, around 45%, are British expats currently residing in Qatar or the UAE or they’re nationals from those two countries,’ he explained.
The firm reports a 60% increase in inquiries month on month from Qatar and the UAE. ‘We attribute this rush to buy phenomenon to those who, quite sensibly, want to avoid being subjected to the extra levy. No-one wants to pay an extra 3% in stamp duty,’ added White.
However, there are extra complications for non-UK residents. ‘Expats and foreign buyers need to be aware that there are extra hurdles that they will have to face. They are typically deemed as high risk by the vast majority of UK lenders,’ White pointed out.
This means that they are usually ‘red flagged’ due to a lower UK credit rating as they have lived outside the UK, earned a different currency and worked for a non UK based firm. This is often the case even for those who have substantial assets and or a high, stable salary. They also need to consider other important factors including the pitfall of wasting money on excessive rates and the ability to reclaim tax within 18 months,’ he said.
‘Therefore to avoid wasting time, effort and money, it is recommended that expats wanting to purchase property in the UK seek advice from advisers who have the relevant experience of cross-border financial matters, who will help them fulfil the criteria in an increasingly strict mortgage environment, and who have established relationships with the relevant UK lenders,’ White concluded.