Can a Foreigner Buy Property in London

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Written By Emma Francis

Emma Francis is an interior design enthusiast and a writer for London Living Spotlight, sharing her knowledge and insights on the latest design trends and styles for London homes.

Possessing a unique blend of cultural diversity, global connectivity, stability, and economic prowess, London has long been considered a significant metropolitan city. London properties hold a magnetic allure for foreign investors, drawing them from all corners of the globe. 

Despite its stature for sky-high property costs, London remains a coveted destination for real estate investment. The city’s excellent political stability, resilience, and legal framework have made it a perennial favorite real estate investment sector among ultra-rich investors.

But can a foreigner buy property in London? Let’s go through the guide for foreigners we hae rounded up.

Buying a Property in London as a Foreigner

London’s property market doesn’t impose any restrictions on foreigners or non-citizens when it comes to investing or owning property. The UK allows non-citizens to apply for and obtain a mortgage for purchasing a property. 

To get a mortgage on a property, make sure you at least have:

  • a bank account in the UK
  • a permanent job
  • permanent residency in the country
  • a UK work permit visa
  • a visa such as a family visa, a tier 1 or tier 2 visa

However, non-UK residents may find it more expensive to get a mortgage on London property. It’s because you have to prove your financial ability and ensure you pay the monthly mortgage payments. On the other hand, mortgage lenders in the UK prefer to lend money against a London property for those planning to move to and live in the UK. 

Buying a property in the UK is an easy process for a cash buyer. All you have to do is exhibit proof of funds (POF), for example, a recent bank statement confirming that you can pay for property in cash.

However, those who are unemployed or have been residing in the UK for less than two years may find it a little challenging to buy a property in the London property market. In this case, the aspirant candidate may need to go through stringent regulatory requirements and pay a substantial amount of deposit. 

Types of Property Ownership in London: Freehold Vs. Leasehold

Before you invest your hard-earned money in London property, you should have comprehensive knowledge of the type of ownership you can try for in the UK. The available options are:

  • Freehold: The freeholder of a property owns it outright, along with the land it stands on. When you own a freehold property, you are the one to be responsible for its management and maintenance. There is no lease agreement to sign with the landlord, meaning you are not possessing the property for a certain period. Freehold is the most common way to buy a house in the UK.
  • Leasehold: While buying a leasehold, you won’t technically get the outright of the property. You can hold the ownership of a leasehold property for a fixed duration (usually 99 years). While buying a leasehold, you ought to ink a lease agreement with the freeholder (the landlord) detailing the time you can own the property. Leasehold is commonplace in the UK when buying an apartment or a flat.

Different Types of Properties in London

  • Flats: Also referred to as apartments or units, flats are most popular in more urban/city-like areas in the UK, such as London and Birmingham. It’s a self-contained accommodation unit that holds part of a big building, typically on a single storey.
  • Detached House: Also known as a single-family detached home, a detached house is a freestanding residential building.
  • Semi-detached House: A semi-detached house is a single-family duplex residence that shares at least one wall with the separately owned home next to it.
  • Mansion: The most exclusive property in London, a mansion is a grand and stately residence often built in the Victorian or Edwardian eras, built from red or yellow brick. They are mostly found in more exclusive enclaves of London, boasting embellished facades and laterally located flats with high ceilings and period features.

Where to Buy Properties in London as a Foreigner

The most suitable area to purchase property in London depends on a slew of factors: cost of properties, ease of travel, distance from your office, etc. Again, based on the location, the property price can vary. However, excellent connectivity and the promise of long-term return on investment (ROI) buoyed by strong capital appreciation have made some enclaves of London top the list of international investors. 

You can invest in properties in:

  • Central London
  • East London
  • South London
  • West London
  • North London

Cost Consideration While Buying a London Property

The taxes that you will need to pay while investing in a property in London include: 

  • Stamp Duty Tax: For all properties valued at £250,000 or more, buyers need to pay Stamp Duty Land Tax (SDLT). Based on the purchase price, date, and number of houses you own, the SDLT rate may range from 2% to 12% of the purchase price.
  • Income Tax: for Personal Allowance above £12,570, you will be taxed in the UK. Based on the annual return you get from your investment property, the government has set income tax bands. For investors with income over £125,140 per annum, the tax band is capped at 45%. The basic rate for non-residents with an annual income of £12,571 to £50,270, while investing in a UK property, is capped at 20%.
  • Capital Gains Tax: While selling your property, you will have to pay capital gains tax in the UK. For people with yearly income below £50,270, the capital gains tax is capped at 18% for residential property. For income over the £50,270/annum threshold, the capital gains tax is set at 28% for residential property.

Some other costs you need to be aware of include:

  • Mortgage payments
  • Survey fees
  • Valuation fees
  • Estate agency fees
  • Solicitor fees
  • Land registry fees
  • Monthly running costs
  • Management or repair costs
  • Regular taxes, such as council tax
  • rental property maintenance fees, and more

Tips While Buying a Property in London

  • Set Your Budget: As we have already stated, based on the location you want to buy a property in London, the price may vary. Setting a budget helps you understand how much you can realistically afford while investing in a property. On top of that, it helps you pinpoint your options available, avoid financial strain, secure mortgage approval faster, and plan for additional expenses. 
  • Find a Property: As you know, you have tons of options and types of properties available to buy in London. Before you make the purchase decision, make sure to decide on the most appropriate type of property investment for you. In addition, navigate through reputed property search websites or visit local real estate agents to check out the properties listed there. For a more tailored search, speaking to a high-end property investment company is always beneficial.
  • Review Your Available Mortgage Choices: You have to apply for a mortgage if you are not paying for the property in cash. Remember, as a non-UK citizen, you may get some hard times or spend more to get your mortgage approved. It’s always advisable to consult a mortgage broker to get an in-depth insight into the mortgage options available for international property purchasers.
  • Know the Property Terms and Restrictions: Before you invest in a property in London, make sure you have a comprehensive knowledge of the property terms and restrictions there. For example, if you spend on a listed building, for example, a grade one or two listed building in London, you are not allowed to modify its structure. On top of that, renovation options are also restricted for the listed buildings in the capital.
  • Make an Offer: After selecting a suitable property in the UK property market to invest in, it’s time to make an offer. Once your offer gets approved, both parties (the buyer and the seller) will exchange a contract. It’s where the transaction is made.

We strongly recommend getting in touch with a solicitor to help you with the legal obligations throughout the buying process.

Emma Francis