Foreign Investors are benefiting from a reduction in the value of Sterling. Recent research has shown that Ex Pats and foreign nationals are cashing in and buying properties while the pound is weak. Liquid expat mortgages have seen a 20% year on year increase in expat and foreign nationals investing in property in the UK. Interestingly, they are not buying in London as the capital is no longer viewed as the safe bet it was furthermore, high capital values and low yields are putting investors off.
For any investor the UK’s property market boasts an incredible amount of potential. Between January 2002 and January 2017, house prices in the UK rose by 147% (Source Rightmove). Furthermore, over the last 20 years, UK property prices have grown by 14.34% p.a. on average. The FTSE All Share index delivered 3.46% p.a. on average over the same time period.
More and more overseas investors are looking for deals further north and Scotland is seen as an attractive place to buy as demand for rental property is high and looks set to stay that way. Recent research undertaken by GVA and PRSim found that 71% of Scots are happy living in rental accommodation and 82% of people who rent say it best suits their lifestyle. Young people are actively seeking to live in the PRS as a lifestyle choice which is contrary to the headlines about Generation Rent and renting being a necessary evil. There has been an increase in the proportion of 16 to34 year olds privately renting from 16% in 1999 to 40% in 2016. The sharp rise has been attributed to the difficulty in getting on the housing ladder, the stifling of real wage growth since the financial crash and the changing lifestyles of young people in Scotland.
Edinburgh is becoming increasingly popular with foreign national and expat investors for many reasons. The city is the UK’s largest financial centre outside of London both by gross value added (£4.201 billion in 2014) and employment (34,800 in 2015). The sector is extremely diverse with strong representation from banking, insurance and pensions, fund management and asset servicing with more than 90% of all Scottish fund managers based in the city region.
The population in Edinburgh has increased by 24,540 over the last five years and broke 500,000 for the first time in 2016. This expansion is forecast to continue at a rate of more than 5,000 people per annum over the next 20 years. However, new build development has not kept pace with the increase in population with just 1,832 units coming to market in the year up to March 2017. As a consequence of this, demand for good quality rental stock will remain high resulting in low void times and strong yield levels.
According to Hometrack, Edinburgh recorded the fastest house price growth in the UK this September with annual uplift figures of 6.7%. We expect prices to continue to grow and some commentators are forecasting an increase of as much as 23% in capital values over the next five years. However, it is our belief that this level of uplift is somewhat optimistic, and we would expect levels nearer 3% year on year. The result is the outlook for continued high returns for investors remains strong.
But with the increasing levels of regulation, changes to the legal framework and increases in taxation it is critical that any investor seeks professional advice. This is especially true for those from overseas who may not understand all the responsibilities of being a landlord and the pitfalls that stand in the way of securing a property which offers the best possible opportunity for a strong return. As an asset management company our focus is on securing assets that offer strong returns while at the same time seeking to mitigate our clients’ risk. We have helped many overseas investors purchase properties in Edinburgh that have performed extremely well and we are seeing double digit returns.
I would now like to look at the key areas that any overseas investor must consider before they invest and how we can help.
It is very important that any purchase is structured correctly to mitigate the tax burden, as such we have a number of partner accountancy firms with whom we have worked closely over many years all of whom specialise in property taxation. It is also worth noting that any overseas landlord must register with HMRC via the non-resident landlord scheme.
For foreign nationals it is very difficult to raise finance in the UK and often investors will buy in cash. We do, however, work closely with a number of finance companies who might be able to offer leverage.
Source a solid and safe investment
It is important that you get the right advice from the outset. We will speak with you to build a picture of your investment criteria then put together a search to find the best opportunities for you. We will also carry out high levels of Due Diligence and analysis on the property to ensure the asset will make a good investment.
We work closely with a range of solicitors and will liaise quickly, efficiently and pragmatically with them during the conveyancing process. Buying a property is not meant to be a complicated exercise.
The property will need to be insured from the point of purchase and again we can help organise this through one of our partner firms.
Glenham, a premier Edinburgh letting agent, will manage the asset and seek to maximise returns while at the same time ensuring all legal and regulatory requirements are met. We will vet tenants, deal with maintenance issues as they arise, collect the rent and pay over income to you our client via our property management service.
Glenham Property is dedicated to managing Scottish residential property on behalf of its diverse client base. We act for a number of overseas investors from all parts of the world and consistently provide our clients with high levels of service and strong returns from their assets.