Almost half of all buy to let mortgages taken out by British expats are for properties in London, according to new figures.
Up to 40% of expat buy to let investors have snapped up property in Greater London with a further 25% buying properties in the South East. Just 10% are investing their money in properties in the South West or North West of the country.
The figures, released by expat buy to let mortgage lender Skipton International, reveal the capital and the South are still favourites for investment thanks to rapidly rising property prices which have led to higher returns on investment.
Nigel Pascoe, director of lending at Skipton International, says: “Property prices in London have increased significantly in the past few years, meaning that capital gains have been very attractive for investors. British expats have many reasons for investing in buy to let property in the UK, and long term investment is usually the most important.
“We see lower average Loan To Values (LTVs) in the South East and particularly London as the rental yields are lower in those regions. Further north in England where rental yields are greater, higher LTVs are supported.”
According to Skipton, 35% of expats embark on buy to let for long-term investment, 19% do it for pension planning, 12% are motivated by a desire to stay in the UK property market, 10% want to have a rental income whilst 9% don’t wish to buy in the country they are living or working in.
Other reasons cited by expats as important were capital growth (6%) and the security of investing in the UK property market (3%). Another 6% said poor return on other investments prompted them to buy property.
However, while London and the South East remain popular because of the attractive capital gains as property prices rise, expat investors should look to other parts of the country if they are more focused on a higher rental yield.
Birmingham is tipped to be one of the property hotspots of 2017. The city is the location for several major developments, including the addition of a new station for the HS2 high speed rail service which will make it quicker than ever to travel to London. With the average price of a semi-detached home standing at around £190,000, having risen 4% in the last year, experts are predicting expat buy to let investors will see rental yields of 7% with a predicted capital growth of up to 20%.
Other northern cities, including Manchester and Leeds, are also enjoying huge investment and regeneration, with the average return on investment (rental yield plus capital growth) for the last five years being 9.9% and 8.4% respectively.
Alex Ewen, head of sales at financial broker Falbros, says: “London and the South East still offer a fantastic return on investment but property prices are high. If you prefer to tie up less capital in a property but still want to invest in the UK,then it is definitely worth looking to the north of England where property prices are much lower by comparison but the rental yields and projected growth are still highly favourable.
“The huge investment many of these cities are now enjoying makes them prime investment opportunities for any expat who wishes to buy a UK property.”
Despite Brexit, the UK property market continues to remain buoyant according to the Knight Frank Global House Price Index thanks to undersupply and low mortgage rates. Average house prices rose by 1.3% in the three months after the referendum in between September 2015 and September 2016 they rose by an average of 5.4%.
The UK growth currently ranks 25th in the global house price index just behind the US which is in 24th position. Top of the table is Turkey where the property growth for the 12 months to September 2016 was 13.9% followed by New Zealand at 13.5%.