If you’re planning to invest in UK property as a US resident, you need to do your research in advance. In this article, the UK-based home buying specialists at Property Solvers explain what is usually involved in purchasing a UK property as a US resident – either to live in or to let.
Current Property Market
It is worth noting that it is a strange time for the UK property market at present.
As a result of the COVID-19 pandemic, a “Stamp Duty Holiday” was announced, drawing to a close at the end of September 2021. Sub-10% deposits became increasingly popular in an approach intended to prevent a property market collapse.
This, along with skyrocketing demand and very low supply, has been persistently driving house prices up ever since, making it very much a seller’s market. At present, property specialists expect prices to remain high for the foreseeable future.
The Purchase Process
The process of buying a property in the UK differs slightly from the US, as it is generally fairly self-led.
UK citizens looking for domestic property don’t tend to use realtors to support their search. Most commonly, they look on property websites and platforms, or visit an estate agent in person for advice on properties in the areas they are considering.
However, as in the US, a buyer must find a specialist solicitor (also known as a conveyancer or lawyer) to help them in the process and, if they require a mortgage, they will need to be pre-approved before one can be secured.
The legal professional you use will undertake tasks such as checking the Land Registry and other sources for any information you’ll need to know, as well as working to transfer legal ownership of a property over to you.
It is currently relatively easy for overseas buyers to get a mortgage in the UK. However, you will find this more affordable if you have been living in the country for more than two years, and if you have a job there.
If this is not the case, you may find that you are required to pay for a larger deposit in before your mortgage can be approved.
Stamp Duty Land Tax is one of the most common taxes relating to UK property. As of 1st October 2021, you will not have to pay this on a property worth up to £125,000.
However, if the property is worth between £125,001 to £250,000, you’d need to pay 2% of the value as Stamp Duty as a UK resident. From £250,001 to £925,000 it’s 5%, from £925,001 to £1.5 million it’s 10% and above 1.5 million it’s 12%.
Non-UK resident buyers face an additional 2% surcharge on top of these amounts.
If you sell your home at a profit, you will need to pay Capital Gains Tax. You will be allowed an Annual Exempt Amount (a tax-free sum) of £12,300 before you must pay this.
Finally, if you are a landlord, you will be taxed on any income you make from rent. There may be additional taxes besides, depending on how you come into possession of the property and what you intend to do with it, so be sure to look into this in detail and seek legal assistance if needed.
While the operating times of UK estate agents may be relatively flexible, you should expect the majority to work to typical office hours (9am – 5pm Greenwich Mean Time) when it comes to answering emails or phone calls.
The UK is five hours ahead of Washington DC, so be sure to keep that in mind throughout your communications.
You will need to make sure that your chosen estate agent and your solicitor are both kept up to date about proceedings at all points in the process to make sure things go smoothly.
Once you’ve had an offer accepted on a UK property, it typically takes anywhere between 4 to 12 weeks to complete the sale and exchange contracts.
However, it can possibly take even longer if there is a property “chain”, which, for example, may occur if the seller of the property you wish to buy is waiting for another individual to move out of a home they are buying before they can vacate yours.
If you need a quick turnover, it’s best to look for new builds or other properties that have no chain whatsoever.
Alternative Home-Buying and Selling Methods
You don’t need to go through an estate agent to purchase a property. Property auctions are also very common, and are usually quicker.
It’s worth noting that once you’re deemed the highest bidder at an auction, you are absolutely committed to purchasing the property in question – there’s no turning back!
What’s more, some people choose to auction their property in order to get a quick sale, before anyone realises there is a legal or structural problem with the building they are selling – so it’s important to be savvy.
Many UK residents also sell property via a fast home-buying service that pay cash upfront to buy property from them directly, completing in as little as seven days.
Overall, the process of buying UK property as a US citizen is perhaps more straightforward than it is in other countries – but it’s important to do your research and thoroughly understand the process before you get started.