Buying or renting as a foreigner in London

 Adapting to life in a new environment is always challenging, especially if you are considering buying or renting as a foreigner in London.

Various factors will contribute to your decision between buying or renting London property: the type of property and the neighbourhood you would like to live in, different kinds of homeownership, the duration of your stay in London, the members of your household, the current situation in London’s property market and its requirements for ex-pat purchasers/renters, the distance from important educational/medical/sports/leisure facilities, public transport interconnections, and last but not least, the property price and your maximum budget.

This article will discuss the factors mentioned above and make you feel less like an alien and more like a real Londoner.

The Diversity of London Real Estate

London truly has a rich offer of different types of dwelling. Learning the difference between terraced, end-of-terrace, detached, semi-detached, mews houses, flats, apartments, mansions, bungalows, cottages, and maisonettes is one of the first steps in getting round the London property market.

Accordingly, London has peculiar real estate terminology that sometimes tends to be full of hard-to-guess abbreviations. Buying or renting as a foreigner in London can be tiresome if you constantly have to grab a dictionary. Make sure you study the jargon before entering into property negotiations and signing a contract full of terms you know nothing about. Learning the lingo is definitely a bingo.

Buying vs. Renting

First of all, the basics. The fundamental distinction between buying and renting lies in who has the ownership, but there are some similarities and differences between the two that deserve attention.

Buying

When you buy a property, you become the owner. This section will distinguish between different types of homeownership and point to the specifics of purchasing as a foreigner in London.

Cash Purchase

If you are lucky enough to be able to pay the whole price immediately, then cash purchase should be your choice. Paying for a property in cash means you’ll have full ownership of your property outright from day one and have a future without anxiety about monthly rents/mortgages. Nonetheless, bear in mind that buying a property in cash in London might seem like a venture reserved for lottery winners.

You can research the latest property price statistics in London in the current UK House Price Index according to several categories – the type of property, funding status, property status, buyer status. In July 2020, the average price by type of property in London for all property was £484,864.

Mortgage Purchase

Luckily, you do not have to pay the whole price at one go. Mortgage purchase might be a convenient option if you would like to divide your payments into regular monthly portions (mortgage) and still be considered the owner of your new London home. You’ll pay your mortgage each month until you pay off the entire loan, and from that moment on you’ll own the property outright.

Pros of Buying

The most obvious advantage of buying is that the property belongs to you. Both cash and mortgage purchase will sooner or later lead you to full ownership. As mentioned already, once you become a full owner, you won’t have to fret over monthly expenses you would pay for your hearth if you opted for renting.

For the ones who are planning a long-term stay in London and wish to establish a close connection with the local community, buying can be the solution for a carefree future tinged with a sense of freedom and security.

Furthermore, if you are a cash buyer or a mortgage buyer who regularly keeps up with mortgage payments, you cannot be evicted at short notice, meaning that nobody can force you to leave your home.

Ownership brings yet another benefit: no one can tell you what you can or cannot do on/in your property. That means you’ll have no restrictions in terms of (re)decorating, gardening, renovating, furnishing, rebuilding, etc. If you wish to wake up the interior/exterior designer inside you and pretend you’re in your favourite real estate TV show, go ahead – fill your home with that quirky modern art. No landlord can reproach you.

Moreover, there’s no limit to the number of household members, pets, or visitors. You can host a house party with over fifty guests, presuming you have tolerant enough neighbours who won’t complain about the noise or sulk about the fact they weren’t invited.

Finally, you can always rent a part of your home you don’t use. You can also financially benefit from a rise in your home’s value if you decide to sell it and buy a bigger property or spend the equity (= property value minus your mortgage) differently. Once you get to that point, check the value of your property instantly or seek professional valuation.

Cons of buying

There are many additional costs that can easily slip your mind.

First, the deposit – a certain percentage of the total property price you pay at the beginning of the mortgage purchase as part of the larger mortgage payment. It depends on the total property price: it’s at least 5% of the total price (during the Corona crisis, it’s been at least 10%) and can reach up to 40% for foreign buyers.

If you pay a bigger deposit, you’ll have lower monthly mortgage repayments later. Use a mortgage calculator to estimate your monthly repayments and how much money you could borrow based on your household income and outgoings and the amount of your deposit.

Normally, you would also pay property purchase tax called stamp duty, but it has been suspended until March 2021, which is known as stamp duty holiday. You’ll probably have to pay for legal costs (solicitor fees), removal costs (transferring your possessions to your new home), insurance, monthly mortgage repayments (if you don’t buy in cash), repairs and maintenance.

Yes, that means that you’ll have to take care of the pipe leaks, appliance and handyman repairs, cleaning and all sorts of annoying nuisances that arise in every home.

Your home’s value might decrease, which will lose you money if you decide to sell it later on.

Similar to all long-term relationships, buying your own property means commitment. Those who wish to buy a home for good should thoroughly investigate whether the property and the surrounding neighbourhood will be suitable to them throughout the life periods that follow.

Buying as a foreigner in London

As a foreigner, you can legally buy property in London and face no restrictions. However, for ex-pat buyers, cash purchase is often a less painful procedure than applying for a mortgage.

Although getting a mortgage is available to non-residents and foreigners with less than a two-year residency in the UK, they will face stricter requirements. First of all, foreigners are requested to pay bigger deposits (reaching up to 40%) and higher interest rates than British mortgage buyers.

Furthermore, to get a mortgage, you’ll need to prove that you have the legal right to reside in the UK. Also, if you don’t have a regular income, don’t raise your hopes too high; foreigners will be approved a mortgage only if they prove they have been financially stable over the last few years.

Renting

If you decide to rent, you won’t be the owner of your property. Compared to mortgage buying, you’ll also make monthly payments (rent), but paying the rent doesn’t eventually lead to your ownership over the property. The property belongs to a landlord. Also, take notice of whether your rent is exclusive or inclusive of bills.

Pros of Renting

Renting is cheaper and more flexible in the short term, and the whole procedure of finding a place to rent is cheaper than the buying process. So, if London is just a short stop on your life path, don’t bother with buying (and selling your property later on, which would be especially unprofitable if the property value decreases).

You need a significantly smaller deposit when renting – usually in the amount of one-month rent. If you’ve kept up with paying your rent and if you haven’t damaged the property, you should get your deposit back when you move out.

You’ll probably be able to rent a property that you couldn’t afford to buy, situated in a nicer neighbourhood.

Fluctuations in property value will not affect you.

If you don’t have time and money for furnishing, don’t worry – most lets in London are already completely furnished.

Finally, the one benefit of having a landlord is that it’s their responsibility to take care of and pay repairs and maintenance.

Cons of Renting

Not being an owner and having to make monthly payments can be a burden, especially at an older age, when everybody wishes to have a sense of security.

Your landlord can legally and easily evict you and expect you to move out at short notice (usually two months), especially if you fall behind with your rent. By the way, the rent might not always stay the same as initially agreed – the landlord has the right to increase it.

Some landlords set strict boundaries as to what is permitted and what’s not tolerated. For example, certain landlords rent out only to particular types of renters (e.g. families/singles/businesspeople, etc.) You might also have to report all your visitors to them. If you’re a pet lover/owner, you should also bear in mind that you look for a pet-friendly place.

Getting your deposit back can often be an issue. However, a reasonable landlord will pay you the amount back when you move out if you haven’t left the place in ruins.

Let professionals do the hard work

You already have a clear picture of what you expect from your dream London home, but don’t know how to begin searching for the perfect property? Maybe you don’t have a clue what exactly you’re looking for, but one thing is clear: you want to move to London. Don’t worry! Professionals have got your back, even if it’s leaned against the sofa miles away from London.

Vyomm is a digital platform that connects the entire London property industry, including sellers, buyers, renters, real estate agents, and other professionals, such as photographers, who bring a property to life through high-quality photos. Choose among the best London estate agents who will help you find your way through an abundant housing offer.

Apart from helping you find a home among listed products, Vyomm showcases off-market properties, ensuring that you will get the property of your dreams. They believe that every Home has a Story and their vision is to present the property’s story online for the seeker to find a deeper connection with the Home they would love to live in. Vyomm’s mission is to bring the market online and make the adventure of finding the dream home easy and accessible, with the help of technology.

For those who decided on renting instead of buying, download Movebubble – a rental application covering properties in London and Manchester. The app makes the renting process simple, transparent and personalized by offering video walkthroughs, feedback and instant renting options via the application.

If you’d like to hear first-hand experience from a fellow ex-pat, who also happens to be a London-based property agent and consultant experienced in real estate investment banking, investing and being a landlord, then subscribe to Ugo Arinzeh’s Youtube channel. Ugo was born in Nigeria, raised in the USA, moved to London in 2011, and immediately fell in love with the city. She will share with you her fascination with London art galleries, diverse culture, restaurants, sports facilities, and other more serious property advice, such as why it might be a great time for foreign buyers or tips on renting a flat in London as a foreigner.

Finding the perfect neighbourhood

When searching for a new home, a lot of people tend to start from choosing a neighbourhood that suits their lifestyle.

For someone who’s buying or renting as a foreigner in London, the mission of finding the right neighbourhood might seem impossible, especially if you’ve never been to London and have to search remotely. The digital platforms (some already discussed in the previous section) will make you feel like you were born in London.

A detailed analysis of all London neighbourhoods, including the information on what (not) to expect, the lifestyle, the market, the neighbours, the loveable features, the map accompanied by high-quality photos worth a thousand words, and the option to browse property for sale or rent, can be found on Vyomm.

Similar descriptions, followed by the data on average property prices can be found on STORED. For a neat visualisation of London city centre and commuter hotspots, visit Homes & Property area guides.

If you’d prefer video content, watch some of the numerous Movebubble videos on the topic of London areas, or check out Ugo Arinzeh’s advice for ex-pats and foreigners searching for a perfect London living area.

The effects of the current global situation on the UK property market H2

Two recent factors have been stirring the pot in the London housing market – Brexit and COVID-19 crisis, causing house prices, mortgages, deposits, and rents to fluctuate up and down.

To relieve the economic shock, stamp duty holiday was set until March 2021, and the Bank of England set the lowest UK interest rate ever – 0.1%, and there have been some predictions that the rate might even become negative in the future.

As a result, foreign, international buyers have comprised more than half of buyers in the London property market in the last few years.

Although it might seem like a great time to invest as a foreigner, be cautious. We’re living in a time of great uncertainty and the property market is in constant flux. So do your research before rushing your decision.

In conclusion

If you still firmly stand with the decision of buying or renting as a foreigner in London, congratulations – you’ll move to a city with excitement waiting at every corner!

The decision between buying and renting should depend on your financial situation, the duration of your stay, the type of property and neighbourhood that suits you, and the property market situation, which currently offers a bit of advantage to foreigners.

Check out some of the digital property platforms mentioned in the article that will help you in your buying/renting process and dive into the adventure of your lifetime!

About The Writer

Utsav Goenka graduated from Regents Business University and spent a couple of years in business development for an Ed-tech start-up. Having been exposed to Real Estate, Property Development since a young age, and having been deeply passionate about technology and how it helps transform lives and industries, he founded Vyomm. Vyomm is a new generation mobile platform for the property market that offers Agents Property Showcases and collaboration tools to provide and distribute immersive property viewings remotely.

Email: [email protected]