Overseas investment in the UK residential property market remains strong as foreign investors continue to see the UK as a safe haven despite the coronavirus pandemic. The UK property market has shown its resilience during the pandemic, with key areas within the UK proving to be hot spots for overseas investors.
What are the benefits of investing in the UK property market from abroad in 2020?
Investing in the UK residential property market allows overseas investors to take advantage of global economic and political conditions. Here are some of the benefits of investing in the UK property market from abroad:
Future tax changes
In the most recent UK budget, changes to stamp duty were announced that will impact foreign investors. From 1 April 2021 all overseas investors in UK property will be eligible to pay a 2 percent stamp duty surcharge of residential property investments. As a result, buyers from overseas are getting into the market early to avoid the additional 2 percent levy.
Currency exchange rates
The coronavirus has had a significant impact on economies across the world. Some have recovered better than others, and savvy investors are taking advantage of favourable currency exchange rates.
The GBP has experienced a steady decline since March of this year. The GBP is now cheaper than it was in June 2016, showing a significant decrease since the Brexit referendum. In contrast, other currencies such as the Hong Kong dollar have been performing relatively well. This is resulting in UK property being very attractive to foreign investors right now.
XE Currency Chart: HKD/GBP Chart
Local property market performance
While the pound has been struggling in 2020, it is a different story for the UK property market which has been faring well. Property prices have been on the rise in the UK with the North West seeing the biggest increase in prices when compared to other UK regions. Unlike many other property markets across the world, the UK continues to provide stability for investors.
The North West region in the UK continues to thrive and foreign investors are taking note. There has been a surge of overseas investment in areas such as Manchester, Liverpool and Preston which are all experiencing rapid growth in 2020.
Growing private rental sector
It is estimated that by 2039 renters will outnumber homeowners in the market and it is the fastest growing property sector in the UK. Generation Rent is driving up demand for accommodation which is having a positive effect on rental yields and capital growth.
Buying property in up and coming areas in the fastest growing sector in the UK makes for a stable medium to long term investment, which investors are looking for given the volatility many markets have experience this year.
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