Buying Property in the United Kingdom
Expats looking to buy property in the UK will find that property is generally considered to be costly, more so than in other countries. Yet despite this, the demand has not dropped. In London, unlike other cities where house prices have declined during the recent banking crisis, prime London property exists in its own bubble with prices having jumped between four and six percent over the past year.
Property in London is in short supply, which has enabled property prices to remain extremley high.
Despite the UK having been in a double-dip recession and mortgages being more difficult to secure, the current economic climate presents good buying opportunities for those acquiring property outside of the capital and not needing a large mortgage. Unfortunately, this has resulted in greater demand which has caused property prices to surge globally during the past few years, starting with Russia and then more recently China, and more consistently, Europe.
As the Eurozone lurches from crisis to crisis, the number of wealthy European property buyers in London has surged. Greeks, Italians, Spaniards and the French are converting their Euros into bricks and mortar, predominantly in London.
Foreigners are able to buy property in the UK and most nationalities are eligible for investment loans, although there are fewer banks offering them. Those living abroad will require proof of income and may be asked to pay up to a 40 percent deposit. Mortgage rates currently vary between three and five percent and the type of mortgage available will depend upon its intended use. Foreigners can often secure loans in their own country as they may already have established assets they can charge against and have mature relationships with their existing banks. It is wise to investigate the tax implications when considering such a loan.
Steps to purchasing property in the UK
The first thing expats need to do is to set a budget and, if a mortgage is needed, make the necessary arrangements.
- Expats will need to secure the services of a conveyance solicitor.
- Once a buyer has decided on a property and made a verbal offer to the vendor’s agent that has been accepted, the agent will submit the offer to both solicitors via the Memorandum of Sale (a buyer could do this themselves if the seller allows it; however, mortgage providers may require both parties to be professionally represented).
- The seller’s solicitor will contact the buyer's solicitor and provide them with a copy of the seller’s title. The buyer's solicitor will then raise enquiries on the title and all other matters that he or she considers relevant. The solicitor will also request a list of fixtures and fittings so that the buyer can be told what is to be included in the sale. The solicitor will also put in hand all the usual local searches.
- Mortgage offers tend to be slower (most mortgages come through within about five weeks of an application being submitted).
The above work is part of the pre-exchange of contracts, that is, neither the seller nor the buyer is committed in any way and either party can still withdraw from the transaction.
Once the work is done and any necessary mortgage offer has been received by the buyer, the solicitors will discuss the completion dates required by their clients. Once this is agreed and all parties are ready to proceed, there will then be an exchange of solicitors’ contacts. Expats will be asked to pay 10 percent of the purchase price at exchange of contracts and once contracts are exchanged there is a binding contract between the parties and neither party can withdraw.
If a person decides to withdraw as a purchaser after exchange of contracts they will lose ther deposit and the seller can then also sue for any subsequent losses they may suffer. It is therefore very important that the buyer does not exchange contracts until they are satisfied with the property and able to proceed financially. The balance of the purchase price and any other fees are paid by the solicitor on completion, so expats will need to provide these monies to their solicitor a short time before completion.
On the date of completion the solicitor will arrange to settle the remaining sum for the property and then register the title at the Land Registry and send the buyer evidence of registration.
Thereafter, the property belongs to the new owner and they can take possession of the keys.
UK property terms
The legal process for buying a property.
An individual owns the land and property completely, and is therefore responsible for all maintenance and repairs.
Much of the property in London is leasehold. This applies to nearly all apartments in London and some houses. In general terms, the reason property is leasehold is that there is an area of communality where various people effectively live under the same roof and therefore have to contribute towards the costs of repairing the roof and structure of the building and any communal areas.
This is particularly obvious where someone is purchasing an apartment. Lease terms vary but nowadays most new leases seem to be granted for about 125 years, but it is very important that expats find out from the agent the remaining term of the lease they are buying and discuss the same with their solicitor as he/she will be able to advise on whether or not the term is long enough.
Recent legislation has increased the rights of leaseholders, enabling them in some situations to collectively buy the freehold of their block of apartments or individually purchase an extension to the original lease. A solicitor will need to advise on this if this is relevant.
A legal situation that can arise when the seller (vendor) has accepted an offer and is subsequently offered a higher price by another party and accepts it. Ways to avoid this are to ask the agent to remove the property from the market at the time of making the offer or to put down an immediate non-refundable deposit at the time of acceptance of the offer from the vendor.
The buyer can reduce an offer at the time of exchange of contracts in the hopes that the seller will accept the lower offer. This is also legal but not encouraged as the buyer risks losing the property if the vendor refuses.
How to find property for sale in the UK
Most properties are advertised online. Information will include details of the real estate agencies, which also have independent websites.
Estate agencies will have local neighbourhood magazines that showcase properties and other general information in the area.
Newspapers all over the country also have property sections, some on certain days of the week.
Properties are auctioned and notices of these placed in magazines and newspapers. Agents can inform buyers of these.
Independent property finders in London, such as Property Personal Shopper, are an efficient and time saving means of sourcing property, particularly for people who are not conversant with the UK purchasing process, have limited leisure time or are not familiar with the areas involved. One of the main advantages of using such services is that property finders are retained by their clients and so pose no threat to the agents who give them access to properties not on the open market, this is of invaluable benefit to buyers.
Tips for foreign buyers
A person know where they want to purchase and ensure their budget is sufficient to meet their needs in the areas they are considering.
Being on the wrong end of a street affects the property price as does the proximity of the address to local amenities and public transport. If it appears too cheap, it’s for reason.
Don’t be put off if a building is going to be or undergoing refurbishment. Apartment block refurbishments are carried out on average every ten years.
Don’t forget the “hidden costs” of buying a property. Solicitors can provide buyers with a list of additional costs which will include Stamp Duty and various other ancillary charges included in purchasing a property.
A full building survey will provide a report to reveal the details of the construction of the property, the materials used and a list of all minor and major structural problems that may exist. This survey is not the same as a mortgage valuation which confirms to the lender that the property is worth the loan; they will not point out any repairs that need to be carried out. For this reason, consider the surveyor’s fee an investment.
Many large cities in the UK, including London, do not have multiple listing services and in some areas there can be over 100 agencies.
Generally, agents work in small catchment areas and it’s worth knowing that within their own companies they do not necessarily share property registers or commissions.
If expats intend buying in a sought-after area, there may be no room for negotiation. It is not unusual for vendors to be offered above the asking price or for offers to go to undisclosed bids, particularly in London.
If a buyer's offers are too low they risk the vendor responding with ‘no further offers from this buyer’.