On a global scale, it seems the UK property market attracts a substantial amount of foreign investment. Why is UK property so in demand? Our research explores multiple factors, from the country’s economic strength to the lack of restrictions foreign buyers face in comparison to other overseas housing markets.
How is the UK viewed on a global scale?
The UK’s appeal stretches beyond its geographical convenience, rich culture and stunning beauty.
Economic strength
Although only recently losing its place to Germany as the fastest-growing economy in the western world, the UK has experienced steady growth for 16 consecutive quarters and has outperformed economic forecasts.
Strong education system
Chief Executive of Juwai.com, Charles Pittar notes that international investors are motivated by four main things; “investment, lifestyle, emigration and education.” He notes, “Many are looking for a foothold in the UK, where they hope their children will go on to study.”
The UK offers a strong education system, with an internationally renowned reputation. 16% of the universities in the Top 25 World University Rankings are in the UK - a notably impressive figure considering its size. The international interest and confidence in the UK education system can be evidenced by the percentage of enrolled international students. According to data recorded between 2015-2016, the international student population sits around 19% in England, 22% in Scotland and 17% in Wales. The London School of Economics and Political Science, for example, has the third highest percentage of international students in the world, at 70%.
In a report detailing the preferred property investment destinations for Hong Kong investors, Jennifer Lai, Managing Partner and Henley & Partners Hong Kong, notes, “The UK remains a civilised country with a good education system, and Hong Kong – and increasingly mainland – parents want to send their children there to study.”
Quality of life
The UK was also named the third best country in the world in 2017 on account of how it is perceived globally. In creating the league table, 60 nations were ranked in 24 categories, “using data gathered from 16,200 business leaders, informed elites and general citizens.”
Technology boom
The UK is currently undergoing a FinTech boom. The sector now employs over 61,000 people and in 2015, was worth a total of £6.6 billion. In fact, in 2016, the UK was recognised as “the best place in the world to start and grow a FinTech firm.”*
As one of the top 100 UK FinTech firms, we recently attended the International FinTech Conference and were delighted by the level of potential the country boasts within the sector. We believe the UK holds a strong, dynamic and innovative stance within the FinTech world, positioning itself for exponential growth in the near future.
How much interest does the UK receive from international property investors?
London, in particular, has developed a reputation for its magnetism amongst international investors. Nicknamed a “safe haven” for investment by Victor Li, director of international project marketing at CBRE, the capital is viewed as a promising destination.
Research published by the House of Commons Library indicates that within the high-end Prime London market, 32% of buyers are international. In addition, 49% of properties sold for over £1m were bought by foreign nationals.
However, international interest is not exclusively tied to the capital. For investors who believe London to be too big of a risk due to high prices (which warrant higher stamp duty charges), the northern powerhouse may prove to be a popular option. Investors can potentially invest the same amount of capital across a wider range of properties. And so, while such deterrents may exist around the capital, international investment migrates internally. Market interest is sustained and redirected to other areas within the UK, such as Manchester, Liverpool or even Cambridge.
Partly due to an ongoing biotech boom, a world-class university and a stunning landscape, Cambridge has been named a key region for international investment. Research published in March 2016 highlighted that between 2015-2016, “one in 20 new-build homes across the city and surrounding villages have been bought by Chinese owners.”
Why is UK property investment so appealing?
Strong housing market
We believe the UK’s property market, in particular, boasts an incredible amount of potential to property investors. Between January 2002 and January 2017, house prices in the UK rose by 147.2%. In addition, over the last 20 years, UK property prices have grown by 14.34% p.a. on average. The FTSE All Share index delivered 3.46% p.a. on average over the same time period.
In fact, new research recently published in the Telegraph revealed that house prices in England have grown faster than “almost all other European countries.”
Political sphere
The result of the EU referendum shed some light on the appeal of the UK’s housing market. In the window of opportunity created by the pound’s devaluation, we witnessed foreign investors “race to snap up London commercial property,” with international investors responsible for 78% of purchased commercial property in the capital in the 3 months preceding October 2016. Between June 2016 and October 2016, foreign firms purchased £2.813bn worth of commercial property in London.
In more recent news, the BBC has reported a surge in foreign investment in London property, attributing the market activity to Brexit.
Restrictions
UK property investment is also remarkably accessible to international investors. Compared to other countries, the UK refrains from imposing buying restrictions which are exclusive to foreign buyers, according to the House of Commons Library.
What are some of the restriction foreign buyers face in the UK compared to other countries?
| Country | Restrictions exclusive to foreign buyers | Regional differences |
| UK | No restrictions | No |
| Australia | Foreign Investment Approval is needed, with the key requirement being that the proposed development increases existing housing stock, i.e. creates an additional residence. Consequently, foreign investment is often focused towards new property | Additional stamp duty applies in certain states, such as New South Wales, Victoria and Queensland, ranging between 3-7% |
| Switzerland | A permit issued by the relevant cantonal and federal authorities is required by “persons abroad.” The Swiss Government has capped the number of properties available to foreign investors (currently 1,440 per year) | Every year, each canton is allocated a percentage of this cap |
| Denmark | Individuals who live outside of Denmark and/or have not lived there for a total of 5 years may require permission from the Ministry of Justice | N/A |
| Germany | No restrictions | No |
| Canada | (See regional differences) | In Metro Vancouver, individuals who are not Canadian citizens or permanent residents will face a 15% tax when buying property |
| Singapore | 15% stamp duty tax. Depending on the property type, foreign buyers may also require approval from the Government | N/A |
| Hong Kong | 15% stamp duty tax | N/A |
| China | No restrictions on the number of properties foreign buyers can purchase, though this must be compliant with regional caps | For example, in Shanghai, unless a buyer holds a Shanghai Household Registration, they are limited to purchasing a single property |
| India | Unless acquired by way of inheritance, foreign buyers are prohibited from purchasing “any immovable property” | No |
| New Zealand | Foreign buyers who purchase and sell a second home within the space of two years will face an additional tax. For tax purposes, if purchasing from abroad, buyers must attain a government ID number | Research has recently highlighted that some banks across the country are refusing providing mortgages to foreign buyers |
All data was sourced from the House of Commons Library
For international investors looking to buy property abroad, it’s important to make an informed decision when deciding on a destination. If you’re looking for long-term potential, a prosperous economy and a robust housing market, the UK might be the perfect destination. When combined with the nation’s “stable regulatory environment,” and high level of transparency, it’s no wonder the UK attracts such interest from international investors. We are proud to have investors in 45 countries, and we hope to watch our global reach continue to grow.
To learn more about property crowdfunding, click here.
*Sourced from Philip Hammond MP’s Foreword in the International FinTech Conference 2017
Written by Jenna Kamal
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