Is Property Investment In The UK a Good Option For Singaporeans?

Investing in the U.K.’s property market is rather easy as there are no restrictions on foreign ownership.

Investing in the U.K.’s property market is rather easy as there are no restrictions on foreign ownership.

Over the last few decades, many foreign investors invested in the U.K.’s property market and ensured a good return.  Overall, the U.K. property market has done well compared to other developed countries for foreigner investors. The list includes Singaporeans as well. The U.K., especially London has historically been a popular investment location for Singaporeans. But now it has become a safe haven by Singaporean buyers as Sterling is weak, interest rates are low, and entry / exit are relatively easy.

Current condition:

There were a number of significant changes in the U.K. property market over the last few years. For instance, investment transactions increased over the last year or so while construction activity dropped significantly. Mortgage lending increased by 30% in November 2013 and total borrowing set to exceed the initial expectations. Value of home loans reached $28bn in November, up by 33% from same month last year. Prices of homes jumped by 3.8% in October from a year earlier, the most significant raise since October 2007.

The process of buying a property:

Investing in the U.K.’s property market is rather easy as there are no restrictions on foreign ownership. However, in the U.K., due thoroughness is carried out before the parties enter into a binding contract. The process includes checking the title of the property, carrying out a survey, getting information from the buyer and the managing agent and approving terms and conditions of the contract. When both parties (buyer and seller) are ready to proceed with the contract, they sign a separate but identical contract. Then it is the solicitors’ job to verify it and approve the contracts as binding. This process is called ‘exchange of contracts’. Once the contracts are exchanged by the two parties, a deposit is paid by the buyer to the seller. Usually this is not above 10% and often is 5%. There is a superseding period which is between 7 and 28 days. During this time, other legal and practical matters are taken care of. On completion of this procedure, the full price is paid, title is transferred to the buyer and possession of the property is handed over.

Taking a loan:

Many banks and financial institutions are there to give loans to potential buyers. If proven eligible, the lender has to take a charge (mortgage) against taking a loan for the property. It has to be registered at the Land Registry office. A specialist bank or lender is usually required in the case when a Singaporean, on any foreign investor for that matter, takes a loan for buying the property.

Keeping Ownership structure confidential:

The UK Land Registry is open to the public. Therefore names of the owner of all properties and price can be seen in the Land Registry’s website. Many Singaporeans do not want to disclose their names owner of the property. Best way to avoid this is to buy the property through an offshore company with shares held in what is known as an excluded property trust.

Fees and taxes:

There are mortgage fees, taxation both at home and in the UK and other legal fees that the buyer may have to pay. The Stamp Duty Land Tax varies depending on value of the property. For properties valued between £0 – £125,000, there is no tax, for £125,001 – £250,000 there is 1% tax, for £250,001 – £500,000 there is 3% tax, for £500,001 – £1 million there is 4% tax, for properties £1 million – £2 million there is 5% tax and for over £2 million there is 7% tax. Just like Stamp Duty Land Tax, Land Registry Fee varies depending on the property value. For properties priced up to 40,000 the fee is £40, for 40,001 – 70,000 it is £60, for 70,001 – 100,000, it is £100, for100,001 – 200,000 it is £200, for 200,001 – 500,000, it is £300, for £500,001 – 1,000,000, it is £500 and for £ 1,000,001 and over it is £800.  A potential buyer must take into account all the aspects of the investment before making the decision.

The whole process and procedure of buying a property in the U.K. can be seen on the government run website.

What do you think?