Overseas investment in London property: what it means in 2021
Despite the coronavirus pandemic, the property market has been relatively resilient in the last 12 months. March 2021 was the busiest month in at least fifteen years for property transactions, spurred in part by the chancellor's stamp duty holiday.
House prices in the UK are continuing to rise, with average annual house growth sitting at 10%. As well as the stamp duty holiday, price rises has been spurred by limited supply and high demand from people looking to relocate or upsize due to pandemic-induced lifestyle changes.
Can foreign investors buy property in the UK?
There are no specific laws that govern or restrict foreign investment in UK property, and overseas investment in London property has been strong for the last few decades.
Whether you’re an ex-pat or have never lived in the UK before, you can purchase property in the UK. While many overseas investors in UK property make outright purchases, it is also usually possible to take out a buy-to-let mortgage, although you may need to approach a specialist mortgage provider as opposed to applying through the typical channels used by UK residents.
There are just over 184,000 overseas landlords that own property in the UK, many of whom have large portfolios containing multiple properties. Last year, 22 percent of prime central London properties were purchased by foreign investors without a viewing having been arranged. Overall estimates for wider London put overseas-purchased property at somewhere between 7 and 10 percent.
According to a study by the University of York, over 22 percent of new build properties in London are owned by foreign investors, with investment hitting a five-year high this year. This inward investment tends to have a positive effect on property prices.
Is investing in property in London a good idea?
As the post-pandemic world begins to return to normality, the allure of the UK education system along with the draw of London as a bustling hub for commerce and opportunity means tenant demand in London has started to rise again.
While all investments carry a degree of risk, there are many reasons to buy property in London. It is considered one of the lowest-risk real estate markets in the UK – even though London has been one of the slower growing regions of the UK, prices have still risen by 4.5% since May 2020.
Where is a good investment in London?
There are lots of up-and-coming areas in London worth keeping an eye on, although from an investment perspective, the following areas are considered by many investors as strong opportunities to capitalise on growth and strong rental yields:
As one of the most upmarket areas of the city, Battersea is popular with middle-class families seeking to settle down or raise children. The area is also due to receive reasonable investment, with plans for thousands of luxury new builds in the area.
While Hackney once had a negative reputation, it is now one of the trendiest areas of London and tends to attract talent within the UK technology industry. It’s also one of the fastest-growing parts of London in terms of GDP, with investment groups suggesting the GDP of the area is likely to grow by up to 18 percent by 2025.
As of 2021, property values in Hackney are actually down slightly in recent years - although it is worth putting things in perspective. A 5 percent annual decrease still represents an increase of over 560 percent since the 1990s. This slight dip makes for a perfect investment opportunity, as prices are expected to increase in tandem with demand for property among young entrepreneurial talent in the area.
Whitechapel is a prime London location and is also currently undergoing serious investment and renovation, with a Crossrail station currently under construction. Tower Hamlets Council currently has plans to construct over three thousand new properties in Whitechapel, which could prove lucrative for buy-to-let investors.
It is important to understand that London is a diverse city that is constantly evolving. Areas that may not seem attractive today might benefit from regeneration within a year or two - which makes it important to keep an eye on property trends in the capital.
Best areas to buy investment in London: find out more
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