UK property has been a favourite of overseas investors for a long time. Strong house price growth, rising rents and incredibly high demand make it a reliable, profitable market.
Even during the economic challenges of the last two years, overseas buyers kept investing. The market has proven itself to be resilient, and reports from CBRE show that overseas investors made a positive NET investment of at least £21bn during the uncertain times.
Furthermore, the company’s 2024 European Investor Intentions Survey shows that the UK has retained its status as the market with the highest performance expectations. The majority of investors surveyed said they expected a return to high growth in 2025, and that residential property was the number one sector.
But why is this? And why should overseas investors buy UK property in 2025?
New property cycle with increased profits
We are at the start of a new property cycle and the profits from UK buy-to-let property for sale are forecast to increase over the next four years:
- 23.4% house price rise by the end of 2029 (Savills)
- 17.6% rental growth by the end of 2029 (Savills)
In some markets, growth will be even higher. For example, the North West is the best property market in the country and Savills predicts that house prices in the region will go up 29.4% in the five years to 2029.
That makes Manchester city centre apartments and Liverpool property for sale an extremely desirable commodity.
House prices are rising at the fastest rate since 2022 and market activity has increased fast in Q4 2024. That means there is money to be made and this is the best time to invest for at least the last two years.
The most important fact is that there are not enough homes in the UK. The government plans to build up to 370,000 new homes a year, but that is still nowhere near enough to meet the demand of at least 4 million.
Until that changes, property values and rents will keep increasing thanks to the overwhelming demand. Investing in 2025 means that you will be able to make the most of that demand and earn the highest possible returns.
Favourable political context
The new government recently introduced its first Budget and it was largely positive for investors. It confirmed:
- Stability – in contrast to the previous two governments
- Low inflation – The inflation target was kept at 2% with favourable forecasts
- Falling interest rates – The government forecast that this would be able to fall further, lowering borrowing costs
However, just as important was what the Budget did not contain:
- Rent caps
- Inheritance Tax increases
- Capital Gains Tax increases on the sale of residential property
- Increased surcharge for overseas buyers
All of those measures would increase costs and reduce returns for overseas investors. Fortunately, none of them were included, making this a largely favourable Budget.
Read more about the Budget and its implications for buy-to-let investors here.
Stamp Duty Land Tax (SDLT) rises are much lower than forecast profits
The one area of concern for property investors was Stamp Duty Land Tax. This was increased by 3% and will affect almost all purchases made by overseas investors.
It is understandable that some may find the higher initial cost off putting. However, it has to be seen in context. The increases to both house prices and rents that are coming in the next five years will be far higher than the one-off Stamp Duty cost.
In fact, it can be argued that the government raised SDLT because it knew house prices are about to increase. The higher tax is confirmation that there are higher profits to be made in the future – and the profits are far higher than the tax.
For more information about the new rates of Stamp Duty Land Tax and how it affects investors, please see our recent analysis.
If you wish to avoid Stamp Duty entirely, you can invest in Purpose-Built Student Accommodation which falls below the minimum price threshold for Stamp Duty.
Student property investment has many of its own advantages and is a popular option for overseas investors, especially those whose children come to study in the UK.
Finally, with all tax-related issues, please speak to an independent financial advisor before investing.
Lower borrowing costs
Alongside growth in both property values and rents, the cost of investing is getting cheaper.
The Bank of England cut the base rate of interest again in November 2024, and the cost of taking out a mortgage will likely fall again like it did after the August 2024 cut.
As mentioned previously, the government has confirmed the inflation target will remain at 2% and the Bank of England believes it will be hit.
Andrew Bailey, the governor of the Bank of England, said that inflation has fallen “faster than we expected it to”, and previously suggested that the base rate of interest could be cut more “aggressively” than many anticipate.
If that happens, it is likely borrowing costs will fall faster than expected and overseas buyers can benefit from more favourable mortgages.
How can overseas investors maximise their returns from UK buy-to-let property?
With all that information and reliable future forecasts, how can overseas investors maximise their returns with UK buy-to-let property?
Buying property off-plan is a good strategy for overseas investors. You can:
- Reserve a property at the cheaper 2024 price, before the house price increases
- Earn capital appreciation over the construction process as property values increase
- Pay on completion with reduced future mortgage rates
- Have a tenant lined up to earn immediate rental income on completion
- Enjoy a hands-off investment experience where everything is taken care of for you
Off-plan property offers overseas investors the best of all worlds. That is especially true with the predicted house price growth.
All of those factors explain why the UK buy-to-let market is still the best option for any overseas investor.
The best investment decisions will be made in the next six months, and overseas investors are ideally placed to enjoy all the benefits of the UK’s growing property market.
Want to learn more about investing in UK property? Our team of experts are available to guide you through the available buy-to-let opportunities and the purchase process. Get in touch today to find out more.
