UK commercial real estate can represent a really attractive investment opportunity — especially in a world where so many trading markets and platforms are incredibly volatile. In 2018, returns of six percent were seen on residential property in the UK, which was before the downturn that has made prices cheaper.1
With prices bouncing back2 and regional opportunities for even more profit, now could be the perfect time to get involved in real estate investment in London or the other cities of the United Kingdom.
Investing in a Property in London
London is one of the business centres of the world. Culturally, historically, and in the world of industry, London has been a key player for hundreds of years. The property market has reflected this, with huge booms and generally high real estate prices. There are opportunities for investing within London.
Common investments include:
- Renovations: Buying a property to perform work on in order to increase the value. This is possible for commercial property as well as residential.
- Buying to Let: The rental market is recovering in London.3 Buying a property to let out can provide a good return on investment. You can invest individually or through companies offering syndicated purchases. Real Estate Investment Trusts are a way to invest and make money on the market, but you won’t be the owner of the property.
- New Builds: If you have more of a budget, you may be able to pay for new property to be developed. While this is a long-term commitment, it has the potential to be extremely profitable.
The advantages of investing in property in London include:
- Excellent Transport Links: It is easy to get to and from properties if you need to work on them. Moreover, there is always a demand for those properties due to the huge population London has.
- Recovering Market: In 2020 and 2021, the property market has started to recover quickly, with more people renting in the city. This means there are plenty of opportunities to get a return on your money.
- A Constantly Developing City: New, fashionable areas of London seem to be booming all the time. For instance, Shepherds Bush was recently named as a “property hotspot”4 and those who invested at the right time may see impressive returns. There are always residential and commercial options.5
Investing in UK Real Estate from Overseas
The UK real estate market is an interesting prospect for people from other countries. Property ownership is a big deal in the UK. However, in other countries, it is not as common for individuals to own properties.
There are plenty of financial products on the market that may be helpful for overseas investors. Some mortgage companies have special products that are designed for non-residents. This means that people who don’t live in the country can buy and rent out.
The process will require quite a lot of paperwork, as you would expect. Keep in mind the fact that there is a lot that goes into buying a house. You’ll need to show your passport and proof that you are worthy of credit. You will also need to put down a big deposit — 25 percent or more — if you are going to get a mortgage in the UK.
While there are buy-to-let options for mortgages, many investors pay with cash.6
Locations for Investing
One of the key considerations for your investment is where you are going to buy the property. Although the average house price in the UK has increased across the board in recent years, keep in mind that there is a huge disparity in prices based on location.
Some areas in the northeast of England allow you to buy a home for £40,000, but they may be less desirable. If you are looking to buy in London, you will be looking at 10 times that cost.
Do your research to find a growing and vibrant area, but one that is within your budget.7
Why Is the UK So Desirable for Foreign Investors?
The UK is historically stable as an area to invest in, especially in real estate. Property investments are backed by an asset, which makes them less risk than many other types of investments.
Additionally, private homeownership is more common in the UK than in many other countries. As a result, there is a larger market with more choice. In many countries, it is normal to rent for your whole life. Conversely, in the United Kingdom, people tend to aspire to own their own homes eventually.
Another reason why the UK is so desirable is the fact that further growth is expected in the years to come. Studies estimate that the property market will grow by over 20 percent in the coming years. That could mean an impressive return on your original investment.8