North and South
First, we must acknowledge the fundamentals that long ago established the UK as a solid investment destination and continue to cement its appeal for overseas investors.
London is a city with strong international standing and a powerful reputation due to its cultural and business stronghold as well as its unrivalled global position as a travel hub and centre for academic excellence. It is consistently popular with high net worth overseas investors seeking to establish interest in luxury property and exclusive neighbourhoods across the capital.
The appeal of world-class higher education institutions continues in the UK’s northern regions across cities including Manchester, Liverpool and Leeds, which also boast increasingly strong career prospects, cultural appeal and quality of life thanks to great investments being made into infrastructure as part of the Northern Powerhouse Initiative and the HS2 high-speed rail project.
With many major companies seeking to relocate their headquarters and main offices from London to the north and demand for high-quality local housing increasing as a result, we have also seen a positive knock-on effect on property investment from overseas into the Northern Powerhouse regions.
From a wider perspective, the UK as a whole has strong economic and political foundations, even proving resilient after the shock of Brexit and the unprecedented situation that is COVID-19. Experts are predicting that the pandemic will only impact the market in the short-term and that pent-up demand and strong economic fundamentals will keep the UK top of the property investment list. All of this has worked together to prove the strength and resilience of the market through the eyes of the international audience to enhance its appeal from an investment viewpoint.
The Appeal of Build to Rent
We continue to see great interest from international investors, in particular, those across Asia and the Middle East. The UK property market has retained its solid fundamentals and remains a strong asset class thanks to key locations offering strong rental demand, high yields and good capital appreciation prospects for consistent returns.
There has been increased interest in bulk purchases from investors in Hong Kong and Dubai, many of whom have the capital and confidence to purchase sight unseen – the most natural and viable option for those pursuing interests from far away, especially in the current climate.
Residential property offers the most solid appeal as the impact of the pandemic on the UK high street risks a decrease in investment value in this regard. Overseas investors are increasingly exploring new builds and the build to rent sector thanks to the guarantee of long-term returns and, again, the option to buy virtually.
Build to rent opportunities are cropping up in strategic locations focused on regeneration with high-growth potential, predominantly those on the London commuter belt as well as northern towns and cities. There has been particular interest in high-end developments with a range of desirable amenities, such as on-site gym and concierge service. Demand is increasing fast in the sector, with overseas buyers especially interested in high net worth investments.
The Higher Education Aspect
Investors from China are one of the biggest driving forces behind overseas investment into UK residential property. Predictions of a Chinese-led house buying boom have been made with key factors including the drop in sterling, China’s emergence from the other side of the coronavirus crisis reigniting investment interests and the ongoing appeal of the UK as a leisure, business and study destination.
With regards to the latter, we have seen and continue to see investments into residential property from the parents of Chinese children studying at UK universities – a demographic that has increased by at least 10% in the past few years and from 106,000 in the last academic year to more than 120,000 this year.
The UK government’s decision to extend the post-study overseas student work visa is expected to fuel further demand in this aspect and strengthen the UK’s position as a prime international higher education destination.
This buyer demographic tends to focus their interests on property that is easily accessible to the university campus, supporting their children in upholding the homegrown values of a good education and achieving their very best potential. This ties directly into positive growth in the buy to let investment market across northern towns and cities such as Manchester, Liverpool and Birmingham, where outstanding international connectivity through the major airports increase the appeal to overseas investors, whilst simultaneously pushing up demand and opening the market up to a whole new demographic of tenant seeking high-quality rental accommodation. Coupled with the lower property prices and opportunity for long-term capital growth, overseas investors benefit from a solid, reliable rental income.
We have also witnessed increasing numbers of Chinese millionaires being granted Tier 1 Home Office residency visas, providing another boost to the luxury property investment market. With hundreds of millions invested every year in London alone, these high net worth individuals are also increasingly pursuing strategic property investment interests beyond the capital in order to build a diverse financial portfolio with the promise of strong and reliable long-term returns.
As property sales to Chinese nationals have dramatically decreased in the USA, this has only served to push the UK higher up the international property food chain and strengthen the supply-demand model.
Strong International Standing
The situation is changing and developing all the time for overseas investors. The latest Budget statement has suggested the introduction of a tax levy to foreign buyers from April 2021 with a 2% surcharge to the existing stamp duty charge. This is likely to prompt a host of deals over the next 12 months as investors seek to take advantage of the fall in sterling and competitive mortgage rates.
Either way, it is anticipated that the appeal of the UK as an investment destination will override the surcharge as people are looking at their investments with a long eye. For all the latest information regarding overseas investment into the UK property market, contact us today.