UK Property Investment After Brexit: What You Need to Know

property investment in uk after brexit

If you’re searching for investment opportunities beyond stocks and bonds, property investment is one way to put your money in assets in the UK, whether as a British citizen or a foreigner looking for ties to the country. While we have examined Brexit’s impact on numerous parts of the economy such as banking, what do international investors need to know about property investment in the UK after Brexit? We’ve done some research to put you at ease when finding your new house.


Brexit and property investing

While there were more uncertainties after the initial referendum vote in 2016 with declines in the British pound, or GBP, prospects for the housing market have seemed to stabilise as the negotiations regarding the transition moved forward. How has the property market reached this point? 

The General Election in December 2019 saw Prime Minister Boris Johnson's Conservative or Tory party win a clear majority, and with that, predictions fluttered in about increases in real estate prices in the Greater London metropolitan area. After the Tories won, there were reports of wealthy overseas buyers snatching up massive housing deals in central London. Before the COVID-19 pandemic, it was predicted that housing prices would increase by one per cent in 2020, then by 2.5 per cent in 2021 and 4.5 per cent in 2022. However, COVID-19 has changed the future trends in this market for the short-term. So, how does this affect demand for business in this industry?

Rightmove, a UK property website, stated that when it comes to real estate activity, the timeframe for those moving houses would move back; however, buyers’ plans to move would not change. As for prices, Hansen Lu of Capital Economics projected that prices would be falling by a modest 4 per cent decline in 2020, compared to the more dramatic 16 per cent decline during the 2008 financial crisis. Many economists predict very low interest rates and supply shortages, along with a more resilient financial system compared to 2008 and a government offering support to those impacted. As a result, they are less fearful as the system has a more firm position than what happened in 2008.

While the UK date to leave the European Union of 31 January 2020 has long passed, we are now in a transition period where things will continue as they were before, albeit with economic challenges coming from the COVID-19 pandemic. 


How to invest in property in the UK

If you’re interested in purchasing a property and you are considering a mortgage, you’ll have to decide whether you are buying a property to live in or buying to let. Why is this difference significant? When you apply for a mortgage, you will need permission should you want to rent out the property. Sometimes, if you initially decide that you are going to live in the property you buy and your circumstances change, you can go to your bank in the UK and request permission from them to let it out. If you decide to become a landlord, you should join the National Landlords’ Association and take the online courses they have on offer. They also offer day courses that let you become an officially certified landlord. 


Talk to a mortgage broker and estate agent

While some people can go directly to a bank and discuss the mortgage products they have on offer, it’s best to go ahead and speak with a mortgage broker. Why? They can assess your financial situation and help guide you to the right mortgage product. Why some average consumers may baulk at the brokers’ fees, mortgage brokers that are not tied to a specific financial institution benefit from having access to a broader range of mortgages to choose from, and avoid choosing an unfavourable mortgage in the long-term. 

You also need an estate agent you can trust who has in-depth knowledge of their local area to ensure you get the best deal possible for your investment. Based on whether you are buying to let or buying to live, many factors will come into play, and you will have many mitigating circumstances enter into your decision-making criteria. 


Consider the type of mortgage (if that is the route you choose to pursue)

If you are looking to take on a mortgage, and you plan on living in the dwelling, Chris Battle of Dubai’s The Property Hub meet-up recommends a capital repayment mortgage instead of an interest-only mortgage. The inflation erodes the amount of money you would have to pay back, so you could end up only have to pay £70,000 in 25 years for your £100,000 mortgage. 


Find the right area

While many people elect to invest in London, what about if you’re considering other parts of the country? Battle says you’ll need to make sure you get a good enough yield, or in essence, the property should make you money. They now stress test properties and your rent should be at least 125 per cent of what you would pay at a 5.45 per cent mortgage interest rate. If you have more than four properties, it should be at least 145 per cent of what you would pay for your mortgage at a 5.45 per cent mortgage interest rate. 

When it comes to Brexit beating cities, the one par excellence is undoubtedly London. Why? The London market shows resilience. Some of the areas that have seen remarkable growth since 2014 in the London area are boroughs in East London through regeneration projects like the Crossrail expansion to Shenfield in Essex. If London is not what suits your fancy, other indicators to examine could be infrastructure projects, the local high street and city centre and the quality of the schools in the area

How do you know for sure if an area is ideal if you do not realise it off-hand? It’s best to go to the area in person, but if you cannot go there, the best thing to consider is how much the average rent is in an area by postcode, and then you can calculate whether it is profitable. That is ideal when looking in markets you may not know as much about as an international investor, such as Manchester, the North, Liverpool, the Midlands or the South where you can find another opportunity. 


Tax considerations

When you invest in property, your tax obligations in the UK change, if it is a second property, you would have to pay a stamp duty of three per cent, and you can deduct it from your capital gains tax. However, you can only do so as an individual and not if you buy as a corporation. Depending on your tax bracket, you may have to file a UK Self-Assessment Tax Return.


Are you ready to begin Brexit proofing property investments?

If you’re living in Dubai and are looking for a way to invest in the UK, whether in commercial or residential property investment or are looking for a home there, our banking team can help. We’ll facilitate those contacts in finding the right financing options, mortgage brokers, estate agents and more as you navigate any question you might have about the British housing trade. Are you ready to get started? Contact us today. 


Written by
Adrian Oton
Adrian Oton

CEO, Europe Emirates Group



Wealth Management and Private Banking
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