Overseas property investment in the UK: Tips for Hong Kong buyers
With Hong Kong’s challenging political climate, more and more Hong Kong nationals are considering overseas property investment. The UK property market has long been of interest to Hong Kong investors. Moreover, the recent introduction of the British National Overseas Visa or BNO Visa that gives Hongkongers a path to UK citizenship has increased interest in UK property investment from overseas.
In recent years, we’ve worked with many overseas clients and helped them find great investment opportunities all across the UK. With this in mind, we’ve put together this guide highlighting the best tips about investing in UK property as a Hong Kong national.
What part of the UK is best for overseas property investment?
Traditionally, Hong Kong nationals looking to invest in UK property have had a keen interest in London properties. This trend remains steady among the wealthier investors with international property consultancy Savills’ Hong Kong office making £87M in sales in 2021, 80% of which was London-based.
While London’s investment appeal is undeniable, overseas property investment in regional cities is on the rise as well. With the introduction of the British National (Overseas) visas scheme in July 2020 and the rise in property prices in the capital, many investors are turning their heads to other major UK cities.
In particular, major regional hubs in the northwest of England have seen a rise in property investment interest. Locations that have recently undergone or are expected to undergo regenerations are especially appealing. By investing in a city’s infrastructure, local authorities boost the economy as well as job growth and create a better environment for property investors.
Additionally, the rental yields in large regional hubs are growing while the property prices are much lower compared to those in London. For example, the average property price in London between December 2020 and November 2021 was £657K. In comparison, the average property price in Manchester for the same period was 230K, in Liverpool – 195K and in Newcastle it was 200K.
Overseas property investment in the UK as a Hong Kong national
UK property investment for Hong Kong nationals is easily accessible if they do not plan to live in the properties they purchase. There are no requirements for a residential status in the UK if you’re a Hongkonger looking to invest in a buy-to-let property. However, if you wish to live in your UK property, you will need to have resident status.
With the introduction of the British National Overseas Visa or BNO Visa it is easier for some Hong Kong nationals to obtain resident status in the UK. If you are a British national (overseas) you and your family members can apply for this type of visa, which allows you to live, work and study in the UK. You can find out more about BNO Visas on the official UK government website.
Difference between buying property in the UK and Hong Kong
Although purchasing a property in the UK is different to Hong Kong, there are some similarities. To begin with, you need to understand what conveyancing is. This is the formal term for the transfer of ownership form seller to buyer and it requires the formal services of a solicitor or a professional conveyancer. As the buyer, you will have to cover your own fees for this service.
The next thing to understand is the memorandum of sale. This document is completed by the seller once the price has been settled. It can be compared to Hong Kong’s Provisional Agreement for Sale and Purchase (PASP), however it is important to remember a memorandum of sale is not legally binding and a deposit should not be expect at this point.
Following this, a process like Hong Kong’s Formal Agreement for Sale and Purchase is in place. At this stage, both parties’ solicitors will need to check all documentation and exchange contracts and a non-refundable deposit will need to be paid. This will make the sale legally binding.
Finally, a settlement or completion date will be agreed upon when the remaining sum for the property needs to be paid and the buyer receives the keys. Additionally, the buyer’s solicitor will have to register the sale with HM Land Registry before the property is yours.
Can Hong Kong Nationals get Mortgages?
Albeit limited, there are options for Hong Kong nationals looking to get a mortgage. Traditionally, UK banks offer standard mortgages tailored to UK residents or citizens. However, specialist mortgage brokers can offer advice and evaluate the unique situation of overseas property investment applicants. Keep in mind that if you’re trying to secure a UK mortgage as a non-UK resident the deposit on the property is likely to be higher.
Stamp Duty in the UK
Similar to Hong Kong’s Ad Valorem Stamp Duty (AVD), buyers in the UK are required to pay the Stamp Duty Land Tax (SDLT). Stamp Duty is paid as a percentage of the property price and is influenced by the buyer’s status and the property value. It is important to note that owning previous UK property means buyers owe 3% on top of the property’s normal Stamp Duty rate. Additionally, non-UK residents are subject to a non-resident rate of SDLT which is 2% on top of the regular Stamp Duty rate.
Freehold Vs Leasehold
An important distinction to understand before making an overseas property investment in the UK is the difference between a freehold and a leasehold. Most houses in the UK are freeholds, whereas the majority of flats are leaseholds.
Essentially, the buyer of a freehold property owns both the property and the land it is built on. On the other hand, a leasehold property buyer owns the property, but leases the land it is built on from its freeholder for a certain amount of time. This can be compared to buyers in Hong Kong having to pay Government Rent.
Leaseholds vary in length, and it is essential to understand this if you ever buy a leasehold property. New builds often have 999-year leases, which give owners more security and ensure the rent will remain stable. However, recent builds also have 125-year leases, which may cause issues if buyers are looking to resell the property in a few decades and there is little time left on the lease.
At Closefield Properties we focus on freehold properties to ensure that our investors have full control of the property. For more information about the type properties that we work with, get in touch with us today.
What Hong Kong property investors need to consider before buying property in the UK
To sum it all up, property investment is an attractive route for many Hongkongers. If you are looking to invest in UK property yourself, you should start by researching property prices and rental yields. In case you are considering a mortgage, contact a specialist mortgage advisor to find out if you’re eligible for a UK mortgage. Finally, make sure you understand the buying process and all the costs associated with it. In addition to the property purchase, you will have legal expenses, Stamp Duty and potential consultancy and travel costs.
At Closefield, we have helped many Hong Kong nationals invest in UK property. We can assist with all parts of the process and offer detailed insights into the best areas of the UK for property investment. Get in touch with us today to book your first consultation with our experts!