With this in mind, it is no surprise that the number of overseas landlords is at a five year high, now surpassing 184,000. This climbing amount of investment is a significant driver behind UK property prices, which have surpassed £300,000 for the first time in history.

However, all good things must come to an end, and with the Stamp Duty holiday concluding in September, will the recent surcharge change perspectives amongst overseas investors?

What is the Surcharge?

Since April 2016, on top of standard Stamp Duty Land Tax (SDLT), investors have been required to pay a further flat 3% Stamp Duty on the full value of all additional properties worth more than £40,000.

However, the UK government has also implemented a 2% surcharge for overseas investors. This surcharge will be in addition to the current Stamp Duty rates and will be applicable for the majority of international buyers, including both overseas investors and international companies. The government has been clear as to who will be exempt from the surcharge, predominantly those involved in Real Estate Investment Trusts and other collective investment vehicles.

The surcharge is largely being introduced in response to UK property’s upward trajectory for the past 20 years, the majority of which has been underpinned by international investment. This level of growth – bar momentary dips – has made it increasingly challenging for first-time buyers in the UK to get on the property ladder, hence the surcharge. 

What Does this Mean for Overseas Investors?

When this additional surcharge was announced in 2016, many experts anticipated a surge in overseas buyers investing in UK Buy-to-Let property, followed by a sharp fall. While international investment remained strong in the years leading up to 2020, the additional uncertainty surrounding Brexit and the pandemic was almost guaranteed to discourage overseas investors.

However, the Stamp Duty Holiday has not only propelled the UK property market, but also dissolved the majority of concerns surrounding Brexit. With the relatively positive results we’re seeing across post-Brexit Britain, combined with the continued growth arising from the Stamp Duty Holiday, the potential growth of UK property could significantly outweigh the overseas Stamp Duty surcharge.

But as government incentives end and the full effects of the Stamp Duty surcharge are felt in full effect, will UK property remain a long-term investment choice for overseas investors?

Opinion

Andy Foote, director at SevenCapital, comments: “Although we’ve known about the surcharge since 2016, the whirlwind of 2020 overshadowed it to some extent. But now it is in full swing, investing in UK property will inevitably be more expensive for non-UK investors.

“Considering the standard rate, combined with the surcharge, overseas investors could face extra payments they hadn’t considered within their property investment planning.

“That said, the performance of the property market over the past year, combined with its forecasted growth, still positions the UK as a high-performing, affordable property hotspot in comparison to alternative countries.

“Not only has the average property price surpassed £300,000, but rental yields are creeping up across the country. While the average UK rental yield currently sits at 3.53%, emerging areas, such as Bracknell, are reaching 4.80% for two bed apartments.

“Offering a passive income of up to £1,103 a month and £13,236 annually, it’s unlikely that this Stamp Duty surcharge will deter overseas investors, with the potential for 14.5% growth in prices by 2025 only offering more incentive to invest in UK property.”

Between Brexit, a global pandemic and extensive tax changes, the UK property industry has seen it all. The market’s resilience alone offers investors the reassurance that property is a sturdy investment, and with this growth forecasted to continue, the Stamp Duty surcharge is seemingly a small price to pay for a potentially lucrative asset.

The post Overseas Investors: Will UK Property Remain a Long-Term Investment Choice? first appeared on Property Insider.

According Knightsbridge estate agent, Plaza Estates “The UK is now more overcrowded than any other part of the EU or G8. With our population at an all-time high and expected to reach a staggering 70 million by 2039, the demand for housing is something that isn’t looking to go away any time soon.”

Along with shares, savings and bonds, property is one of the top four investment practices in the UK. It’s also widely recognised as one of the safest-as long as demand for housing continues to outweigh demand, there will always be opportunities for significant returns on investment.

Since 2000 the UK property market has outperformed the equities market by almost 50%. Add this to low interest rates and a volatile stock market and it’s not hard to see why so many astute investors are looking to put their money to work in property.

And it’s not just about buying and selling. With thousands of people unable to afford to get a foot on the property ladder, the demand for rental property has doubled in the past fourteen years- great news for those looking for a lucrative buy-to-let opportunity.

Many landlords are choosing to purchase large buildings, convert them and let them as HMOs (Houses in Multiple Occupation) and then rent the rooms out to students or other sharers. Rent guaranteed specialist, Assetgrove says “Renting out HMO properties is a sure fire way to make money quickly, so it’s becoming more and more popular with savvy investors.”

EU Referendum in June 2016 and the surprise election of Donald Trump has undoubtedly sent the UK and the rest of the western world into sending into a state of shock and chaos. The pound dropped, the markets went into flux and property prices plummeted as the financial world desperately tried to predict the consequences of the UK vote.

The good news is that investors have been able to take advantage of these low prices, buying properties for well below the normal market value and selling them for a significant profit.

Brexit hasn’t stopped people buying property- almost 50,000 houses were purchased during the month of June alone; the highest growth for almost a year. UK properties have also seen lots of interest from overseas investors, particularly China and India- Central London estate agent, LDG observes “Wealthy parents from abroad are buying homes in university towns for their student children, then selling up a few years later for a tidy profit.”

With an ever increasing population, one thing is for certain- people will always need houses. The UK’s demand for housing continues to grow, presenting investors with powerful opportunities to watch their money grow.

Guest post provided by Property Division.

The post Investing in property – Why it’s still as safe as houses first appeared on Property Insider.