Donnell Bailey is a Content Writer for Lofti.co, the UK’s first 3-in-1 property management platform with embedded financial products built for rental agents and portfolio landlords.
Investing in overseas real estate in the UK is a fantastic way for those who have money in the bank outside of the country to safeguard themself against inflation. Because of the UK’s inflated property prices, it has become a popular way for many individuals to diversify their portfolios and potentially increase their returns. Read more here on how inflation impacts house price so you’re better able to understand this phenomenon.
As a resident of the United Kingdom, you can explore this investment option. However, make sure you consider all the factors below before you invest in property. This article looks at how you can take advantage of a rising property market if you’re located outside the UK and what you have to do to stay on the right side of the law.
Can you participate in overseas real estate investment if you live abroad?
Yes – buying UK property is an option for those living outside of the UK, as long as you follow the right information to make sure you’ll be approved by lenders, and that you have the right to do so. For instance, if you are trying to invest in a buy to rent property in the UK, you have to follow regulations you can find here.
Once these regulations are met, then you must follow the process of arranging an overseas mortgage with the bank that is in your country of residence. Depending on the bank, you may also be able to apply for a mortgage directly with a bank or lender in the UK. Nonetheless, each lender has different policies, and you’ll have to consider this on a case-by-case basis.
Row of houses in the UK bought by an overseas investor
The criteria you must meet to make a property purchase in the UK if you live overseas
While each lender is different, there is a general criterion that must be followed for every type of property investment.
- The investor must be over the age of 18
- Proof of address and identity must be provided
- You need to pass a credit check with either your local bank or a bank in the UK
- You must need a surveyor to find the true value of the property over time
Other criteria you may be required to follow include the following:
- You may need to present a pro forma or plan for the property to the lender
- You may have to appear at the bank in person for it to approve a mortgage
There may still be and most likely will be additional requirements that the country you reside in places on your investment. The sending of money in general is widely regulated by the FCA in the UK and each country in the world will likely have some form of additional financial institution that has to approve the mortgage.
Bunch of keys for a house belonging to an overseas to a real estate investor
Are the number of overseas investors in the UK growing or shrinking?
In general, as a landlord finds out about the investment opportunity in the UK, there tends to be an increase in property demand, and this generally follows an increase in inflation.
This is because inflation directly impacts the rate of interest on mortgages in the UK.
As a result, there has been a large investment from foreign investors in real estate but ever since 2022, this demand has gone down as interest rates rose to combat the high rate of inflation.
Are foreign investors more likely to buy in attractive locations?
In general, overseas real estate investors are just looking for a safe place to park their money where they can also make a return on it also. As a result, those with the highest capital start-up cost to invest in property can purchase in the most attractive locations that represent the areas where there is the highest capital appreciation and buyer demand.
For instance, a wealthy investor could go the route of trying to maximize rental yield by investing in areas where there is very little capital appreciation and lower rental demand.
This would require multiple property purchases; hence, many look for larger properties with low rental demand but high capital appreciation like those in the City of London.
The impact of the pandemic on foreign investors
The pandemic has caused the issue that a new set of properties has opened on the market because investors are able to make an appreciation on properties far outside of London.
The pandemic encourages property investors from outside the UK to invest in areas that saw an increased demand and property appreciation due to more people being able to work from home.
The Southeast of the UK saw the biggest increase in property prices following the two years of the pandemic as people who live there can stay close to London for work but benefit from lower property prices.
How to attract buy to let foreign investors.
To attract foreign investors who are interested in the appreciation of a property over time, lower residential mortgage rates could be an incentive, especially if the property is in an area where there is a high capital appreciation rate. Generally, the areas of the UK that have a high capital appreciation are those where property is more expensive. On the other hand, if an overseas investor wants to benefit from higher rental yields that can be found in the UK, then they would need a buy to rent mortgage and high rental yields. Areas of the Uk that attract a lot of buy to rent foreign investors in this way include towns where people don’t plan on buying like Sheffield or Doncaster. Instead, they rent for long periods of time.
