For many years, US investors have been among the foreign buyers that have favoured the UK as one of the world’s most promising property investment destinations, and this trend has been boosted recently.
While the buying process in the UK is somewhat different to in the US, citizens from the states find the property investment landscape in the UK a particularly lucrative place, heightened recently by the favourable dollar-to-pound exchange rate.
The UK’s housing market has remained robust through significant economic ups and downs over the decades, ensuring capital gains for most investors who hold onto their assets for a period of time, which is why US investors continue to have confidence in the sector right now.
Meanwhile, for those who opt to rent out their investments, the private rented sector is now home to around a fifth of the country’s population, ensuring high tenant demand and strong yields, particularly in certain hotspots across the country.
These so-called hotspots continue to change, though, and while traditional US investors might look to London as a default starting point, it no longer holds the torch as the most profitable investment location, instead being overtaken by parts of the north and the Midlands.
The ins and outs for US investors
For US investors, there are no legal restrictions to owning a UK property, although there are a number of rules and regulations, particularly regarding tax, that buyers from the US should be aware of.
It is possible and relatively straightforward to obtain a mortgage through a specialist lender to buy UK property. However, the process will be easier if buying with cash.
Typically, lenders will require a 25% deposit for foreign investors, and each bank will have their own set of terms for borrowers. Interest rates may be higher than for locals, though, and it may be advisable to use a local broker who can access the best deals.
In terms of finding your ideal UK investment property, many US investors opt to work with an agent or property investment specialist, as this is similar to the way US property is sourced by buyers – using a realtor. They will have the local knowledge to help the buyer find the best option for them.
There are also a number of tax considerations to be aware of, which will differ from the US market. This includes stamp duty land tax (SDLT), which includes a 2% surcharge for foreign buyers, capital gains tax on sale of the property, and income tax payable on rental gains, and you can learn more about these on the government website.
The best places to invest in the UK
Although the UK is, of course, only a fraction of the size of the states, US investors might be surprised at the huge regional variations that exist across the country. Location choice can make a vast difference to your overall return on investment, as well as your experience in the market.
A huge amount of property in London is owned by investors from overseas, including US investors. Being the country’s main economic hub, it is no surprise that buyers are attracted to the property market there, along with the high levels of rental demand.
However, in recent years, the London market has had much weaker performance than other parts of the country. House prices there have soared over the past few decades, but have plateaued for several years now, whereas other parts of the country are accelerating.
Manchester is currently a frontrunner for both domestic and overseas investors as a property investment choice. House prices in and around the city have seen some of the strongest growth in the country in recent years, but remain considerably more affordable than the capital and the south east.
The surrounding area and commuter belt are also gaining traction, particularly since Covid, with the likes of Stockport, Preston and Bolton all attracting growing numbers of property investors looking for the best returns.
Also in the north west, Liverpool is a city that has emerged more recently as one of the most promising investment locations, being the target of some of the UK’s most exciting regeneration and redevelopment projects. Landlords operating here will find yields stronger than in most other cities.
Birmingham, often referred to as England’s second city, is also a particularly attractive location, with many investors trying to get in early in order to see the biggest gains off the back of the arrival of HS2. Aside from this, though, the city’s own regeneration plans have seen it rise through the ranks as an appealing place to live and work.
For US investors looking at the UK right now, one of the biggest benefits is the resilience the country’s housing market has continued to show through Brexit, the pandemic and rising inflation rates. There are still plenty of areas across the country that are expected to see thrive in the coming years.
