You are using an outdated browser. Please upgrade your browser to improve your experience
Written by Adrian Bishop (Halo Finance)
A range of new expat buy-to-let mortgages are coming onto the market, as investors are told they have a “once in a generation opportunity” to invest in the UK property sector.
Falling prices, low interest rates, weaker Pound
The rare combination of falling property prices, low interest rates and a weaker Pound – dragged down even further by the Brexit saga – provides international investors with a prime opportunity to gain access to the UK real estate market, experts suggest.
Surge in Middle Eastern investors
Adam Price, Managing Director at Select Property Group, which has an office in Dubai, told The National there has been a surge in Middle Eastern investors looking to invest in UK property market in what is a “once-in-a-generation investment opportunity.”
PCL property values at five-year low
International property specialist, Cluttons, says prime Central London property values have hit a five-year low.
‘London appeal is strengthening’
Faisal Durrani, Cluttons head of research, says, “The appeal of London amongst the Middle East cohort appears to be strengthening once more. With the currency advantage for Middle East investors, who are effectively US dollar purchasers due to fixed exchange rates, there may be the perception of a reversal in the buying advantage as sterling recovers to an extent.”
Last year of price corrections?
This year is likely to be the last year of price corrections in both prime Central London and markets that surround the city’s golden postcodes, says Mr Durrani.
‘Take advantage of the softer market’
“The single biggest factor that has helped values remain relatively stable since the Brexit referendum has been the absence of motivated sellers. For would be buyers, the tail end of 2018 is likely to be the best time to take advantage of softer market conditions and to snap up homes at values that have not been recorded in five years as from 2019 onwards, an accelerated rate price increases is expected across the board.”
Significant savings on currency exchange
At the same time, Halo Financial has seen strong demand from expats looking to exchange currencies connected with UK property deals. Investors can save significant sums when exchanging money for a property sale or purchase over typical bank rates. Halo Financial is also renowned for providing a dedicated currency specialist for clients, as well as providing top-class customer service.
New UK buy-to-let mortgage options
Meanwhile, several lenders are offering new buy-to-let mortgage options for UK expats.
After simplifying its expat mortgage range from seven products to two a few months ago, Lancashire-headquartered Marsden Building Society has refreshed its product portfolios with two new Expat Buy to Let products and Expat Residential products.
Improved expat portfolio
The Expat Buy to Let options include a two-year fixed-rate product at 2.99% or three-year at 3.09%. There is a £299 booking fees and 0.60% arrangement fee to add, but there is £300 cashback on completion for remortgage clients.
Heather Crinion, General Manager (Operations) says, “We’ve released our new and improved Expat portfolios to support intermediaries with expat clients looking for solutions. We’re continually innovating our expat ranges to support intermediaries in their expat business, recent changes have seen introduction to expat products to all intermediaries, a re-introduction of Qatari Riyal to our accepted currencies and product portfolio changes.”
Products for expat landlords and holiday let owners
Specialist mortgage lender, Paragon, has extended its buy-to-let range to include mortgages for expat landlords and holiday lets in the UK.
They are available at loan to value (LTV) ratios up to 70% for up £750,000 and up to 65% for loans of up to £1 million.
Mortgages for holiday lets are available up to a 70% LTV for loan amounts up to £500,000.
John Heron, Managing Director of Mortgages at Paragon, says, “We are really pleased with these product changes and hope that they will be received well by our intermediary partners. We have looked very carefully at the customer journey for expat buy-to-let landlords and have identified a number of areas where we think it can be simplified and improved. Similarly, with our holiday let criteria we are recognising how landlord strategies can change in the face of a more fluid rental market.”
All of Paragon’s new products are available via mortgage intermediaries for individual and limited company landlords with single, self-contained units.
Guangzhou, China – Halo Financial
Open to landlords overseas
Paragon’s expat mortgages can be used by landlords based in over 30 overseas countries to finance property in the UK. Landlords must hold a current British passport, have held a UK bank account for at least three years and use a managing agent.
Paragon’s holiday let mortgages can be assessed on Assured Shorthold Tenancy (AST) rental income or proven, historic holiday let income.
Expat landlords and holiday lets represent growing segments of the UK buy-to-let mortgage market.
Durham-based Atom bank, recently named one of the world’s most innovative companies in financial technology, has entered the Buy to Let mortgage market with a pilot scheme available through select intermediaries.
Remortgage products for landlords
Initially the range from Digital Mortgages by Atom bank will include two and five-year tracker Portfolio Buy to Let remortgage products for landlords who have anything from 4-25 properties in their portfolio.
Rates at launch include a two-year base rate tracker, 75% LTV Remortgage at 3.70% (tracking at 2.95% above base rate); and a five-year base rate tracker, 75% LTV Remortgage at 3.80% (tracking at 3.05% above base rate). There is a 1% product fee and maximum loan term of 25 years.
Selected brokers and their customers will also have access to no Early Repayment Charges and automated valuations.
‘Great all-round deal’
Maria Harris, Director of Intermediary Lending at Atom bank, says, “We are delighted to announce our launch into the portfolio buy-to-let market. As our mortgage proposition grows, we want to transform this market, making mortgages easy and transparent to buy and offering landlords a great all-round deal.
“The initial pilot with a select number of intermediaries will help us make real time improvements before we roll-out to a wider audience. We’re also already working on extending the range to include fixed rate products.“
Digital Mortgages by Atom bank first launched Business Banking Secured Lending when it launched in April 2016, followed by residential mortgages in December 2016. It has now lent over £1.8 billion to small businesses and homeowners.
Another digital lender, molo, has launched Buy-to-Let mortgages, which can be approved within just 15 minutes, but these are currently limited to borrowers in England and Wales. Even when applications are referred for additional credit checks, molo still hopes to get a decision for most customers within 24 hours.
It offers a choice of two, three and five-year fixed rate buy-to-let deals with up to 80% LTV. Rates start at 2.29% for a 65% LTV deal.
Molo plans to extend its offering to residential propositions, as well as the rest of the UK in due course.
4.9 million UK-born emigrants
Although the expat market is difficult to size, according to statistics from the United Nations, there were 4.9 million UK-born emigrants in 2017.
Most British expats are based in English-speaking destinations, with 33% in the southern hemisphere and 28% in North America.
Just over one quarter (26%) of British expats live in the European Union, and growing numbers of expat landlords are also based in the Middle East and Singapore – areas with modest taxes and relatively high wages.
Rising demand for holiday lets
Looking at holiday let demand, Visit Britain recorded a 6% increase in domestic overnight holiday trips to 59.1 million in 2017 and international holiday visits also increased 11% to 15.4 million.
Britain top target for Gulf investors
According to a Select Property survey, the UK is one of the top overseas property investment destinations for over three-quarters of investors based in the Gulf Cooperation Council (GCC).
In all, 77% of those surveyed say British real estate is among the strongest of international property investment options, according to the Select Property Group’s GCC Investor Report 2018.
86% of Bahrain investors look to UK
Investors in Bahrain are most supportive, with 86% viewing British real estate most positively, followed by the UAE and Saudi Arabia, both on 79%.
What are the attributes of UK property that continue to make it a popular asset among investors in the region?
The UK was in the top four destinations where GCC investors buy property overseas, along with the USA, Turkey and the UAE.
UK ‘to remain investment hotspot’
Adam Price explains why the UK property market is likely to remain a popular target for investors. “It’s important to remember that UK property prices are also integral to the economic health of the country, and the UK government has a vested interest in maintaining growth in the market.
“Over the next five years, average comPound growth of property prices is forecast at 14.2%, while rents are also expected to have increased 17.6% by 2021.
“Furthermore, UK law is often viewed as the best in the world, and foreign property investors in the UK are protected to a greater extent than those buying in other destinations.
“It’s for these reasons that I am confident UK property will continue to remain popular across the GCC in the coming years.”
Practical advice for UK property buyers
For expats returning to the UK, buying property can be daunting, Bill Spreckley, of property finders, Stacks Property Search, offers some practical advice.
Returning can be daunting
“For expats, returning to the UK can be a daunting prospect after a posting overseas. Depending on how long they have been away, they can be out of touch about many aspects of UK life, property and schooling being the most frequently cited areas of difficulty.
Home Counties and beyond
“In the past many expats moved back into London, and followed it up with a move to the country after a couple of years. But with moving costs being so prohibitive and with the eye-watering prices of property in the Capital, a high percentage of expats are now returning directly to the Home Counties and beyond.
Main buying challenges for expats
The exercise should be treated as a mission – to be taken on by a member of the family, a friend based in the UK, or an independent property professional, he says. “If the property search is treated as something to be fitted into short bursts of downtime, it’s unlikely to be successful. A bad purchase will probably be a short-term purchase, and the costs of buying and selling are much too onerous to be relaxed about doing it more than once. Much better, less stressful and cheaper to get it right the first time.
Treat property search as a mission
“Your UK based collaborator should be ready to go and look at properties without delay and send you a report about the pros and cons, even video footage if necessary. If and when they find a potentially suitable house, then you will need to get on a plane to come and have a look. Most estate agents and therefore vendors are reluctant to accept an offer from buyers who haven’t physically seen the property.”
Importance of employment, schools and family
For those looking for work, it is sensible to tie in the house buying process with the job search. Access to good schools is vital for those with children and proximity to family and friends in another vital consideration.
Build up local knowledge
“Once you have committed to a certain area, the more times you can visit it before you move back and the more houses you can view, the more local knowledge you will build up and the more certain you will be when the right house becomes available.
“Most expats are paid in Dollars or Euros, so due to currency exchange rates, now is a good time financially to buy a property – especially as the Stamp Duty surcharge widely expected in the Autumn 2018 budget for foreign purchasers hasn’t materialised,” he points out.
“Many of our recent expat clients aren’t due to return to the UK in the immediate future, but have decided that now is the right time to buy themselves a foothold for when/if they come back, or even purely as an investment.”