Where do I start?
When you come to do the research prior to buying a home in the UK, a better question might be, “Where do I stop?” There is so much information out there! This includes dozens of house price indexes, thousands of websites and hundreds of forums and blogs.
For detailed information, a good start will be Rightmove, the biggest property portal in the UK. This is also the place to start looking for property. Virtually every estate agency in the country will put its properties on Rightmove – it’s the first question vendors ask. The website has plenty of tools to help you assess the fair value of a property too. Of the many house price measures, the Office for National Statistics’ House Price Index is probably the most authoritative.
Beware, over £1.5million you’re paying 12% stamp duty (plus 3% for investment and second homes).
Who pays for the agent?
The seller pays the agent’s commission. This is generally around the 1% mark in the UK, plus 20% VAT.
What other costs are there?
The main fees that the buyer pays are:
- Legal/conveyancing fees of around £1,000-£1,500.
- Stamp duty. This is the tax payable when buying a home in the UK at a price of over £125,000. For the portion over £125,001 and up to £250,000 you pay 2% PLUS a further 3% for investment property and second homes. It then rises in bands. Beware, over £1.5million you’re paying 12% (plus 3% for investment and second homes).
- Survey: Given the high price and the age of much UK property, most buyers opt for a survey of some kind. This will establish if the property is structurally sound, has any major defects, is at risk of flooding or subsidence, etc.
- Money transfer fees of around £50
- If you’re buying with a mortgage there may also be a mortgage valuation fee. If not payable upfront, it will inevitably be hidden away in the mortgage rate.
What’s the difference between leasehold and freehold?
A freehold is where you own the property, and the land on which it stands, indefinitely. Houses are almost always owned freehold, but even with a flat you can own the share of a freehold. With a leasehold property you’re buying the right from the freeholder to use the home for a number of years. Leases are usually 99 years or more, but can be as high as 999 years or as low as 40.
When buying a home in the UK with remaining years on the lease, you need to be very careful. As the lease run down the value of the property to any further leaseholder down the line decreases sharply. So if a flat’s 100-year lease began in 1990 and you buy it in 2018, you have a lease for the remaining 72 years.
When a lease gets this low, however, you, or a subsequent buyer, will struggle to get a mortgage on it. You can apply you extend it, but this can cost tens of thousands. The other issue with leases is the ground rent. These can be anywhere from virtually nothing (known as “peppercorn rent”) to hundreds of pounds per year. Do not agree to buy a leasehold property with less than 75 years remaining, or with high ground rent, without getting good legal advice.
You’re unlikely to be ripped off, but it‘s always worth making an offer of at least 5% below the asking price.
How do I know I’m paying a fair price?
The British property market is highly competitive. One of the first things you’ll notice in any British high street is the large number of estate agencies. Each is keen to get the listings, and so will tend to tell house sellers that they can get them the best price. On the other hand, given the commissions typically of 1%, they need to price to sell a reasonable turnover of properties. In short, you’re unlikely to be ripped off but it‘s always worth making an offer of at least 5% below the asking price.
One other positive of the UK market is that with prices listed on Rightmove there is one price for the local and the overseas buyer. In some overseas markets you may feel like the sellers add a zero to the price when they see a foreigner approaching!
For a detailed explanation of how you can protect your budget from currency risk when buying in the UK, read the Property Buyer’s Guide to Currency. It is written by our currency partner Smart Currency Exchange, rated “Excellent” on Trustpilot.
Are there rental restrictions?
Buy to let has been a highly popular investment vehicle in the UK in recent years. There are very few restrictions on renters. Those that are in place are primarily to protect the tenant, not the local hotel trade, for example, as in other countries. Hence there are no zoning restrictions, very few minimum requirements for facilities (other than for hygiene and safety), and virtually no restrictions on Airbnb and other sharing websites. The main requirements are to protect your tenants’ deposits in a rental deposit scheme and protect their safety via fire alarms, electrical inspections etc.
For short-term rentals you generally don’t need to be licensed. The exception, however, is if you’re in an area where the local council has a “selective licensing scheme”. Look under the local council website, or give its housing department a call, to see if there is one in place where you intend to buy.
You will certainly have to get a licence, however, if you have a House in Multiple Occupation (HMO). This is a property let to several tenants forming more than one household. In other words, they’re unrelated and not living together in a relationship. You’ll need a licence for an HMO if it is home to five or more people and/or is three or more storeys high. The most common form of HMO is shared student accommodation, so if you are an investor buying in a university town do ensure you know how many people will live in the house. You should also enquire of your mortgage lender whether they allow rentals in the property.
Does buying a home in the UK gain me residency?
No, there is no “golden visa” like we see in Cyprus, Spain and Portugal. The UK does allow for investment as a way to gain a visa in the UK (the Tier 1 investor visa is currently set at £2 million) but it specifically exempts property investment.