Buying in the UK, England, London

Hi all,
I've been reading here for 2 years.. thank you contributors.

I did search the forums before posting but had no luck..
please point me to any threads already covering this.

I'm seeking your advice, thoughts, tips, info, predictions in relation to possible purchase of an IP in London (although, I added UK/England to the thread title for search reasons, in case this thread spreads).

First, I am a 30ish yo male with little income/ability for negative gearing.
I already have an IP here with about 100k equity, and about 300k cash (which is currently 185kGBP).

I also have family in london, I have dual citizenship.

At this stage:
- There is a strong aussie dollar.
- I have no ability to compete with negative gearing high-earning aussies.
- Brisbane property hasn't got the best outlook in the near term.
- Brisbane property yields poorly for those with no tax to minimise.
- I have a large desire to leave Brisbane and my work is fairly portable.

I may decide to move to London and buy something, living in one room and renting the other(s).

I may decide just to buy and continue to live here.

How is London, in terms of yield?

Where are good areas for rentals?

Is it OK/normal for managing London property via agent..
or is it more for hands-on Landlords?

Where do you see the GBP vs AUD going?
Is it heading back to 3bucks to 1squid?
Could it collapse further?
If Europe debt worries increase.. where does that take the exchange rate?
If China slowsl where does that take the exchange rate?

Any tax status info is appreciative.

If you have come here looking for similar answers, please speak up so contributors know that others are intersted.

(I posted something similar on another forum but I wanted to focus on IP possibilities so I post here)

I've also been interested in UK property after watching shows like "homes under the hammer" and wondering how cosmetic renos seem to be so profitable When I know back in Brisbane you're bound to lose money if you take on a similar project.

I've found this website to have a load of info for learning more about the buying process and costs..

I think some of the main differences are: You're more likely to get a bargain at an auction in the UK as they explain here. There is no stamp duty to pay on a purchase less than £125k, above £125 it's still pretty low comparitively. Holding costs are lower - interest rates are at 3.5%. If you're buying to hold the tenant pays the council tax.

But min deposit for "buy to let" is 25%, (Barclays require 40%) and you need a minimum income - from memory £35k/pa for Lloyds TSB.

I'm not sure what your budget is, so can't recommend any areas in London.. Have a look at http://www.foxtons.co.uk/ to see where you can afford, and compare them to the rentals to calculate the yields.

I'm not sure what is more common in the UK, self managing or using a PM. Each property I lived in when I was there was self managed, but I think that had more to do with the flat share arrangement I went for.

Good luck, and post any more info you find

Good info in post above. Just wanted to add that yes, yields are much better over there: in London they usually cover the mortgage. Also, the presence of Polish tradesmen keeps prices down, so you might find that means that doing a cosmetic reno is cheaper there than here. I had friends who would have a team of Polish tradies come and stay in their place while doing it. They did a great job and didn't charge a lot.

I could be wrong, but I think tenants have fewer rights in the UK. I recall that we had to prove, for example, that we had had our flat professionally cleaned and fully steam cleaned, including all curtains, to get our bond back.

From my experience, agents in London don't offer full property management services like they do here. They look for tenants etc but after that, it's between the tenant and the owner. There are also UK specific issues such as leasehold / freehold and 'chain' to consider.

Cheers for the info so far!

Foxtons revealed one property which seems to be for sale and for rent.

So, they are asking 455000 pounds for sale, and 415 pounds/week for rent.
My rough calculations (possibly incorrect) make this to be a dismal 4.8% gross return.

I might contact a London RE and ask for a link to their best yielding freehold property.

I think you can do better than 4.8% gross yield, but even that could be cf+ at the moment with current interest rates and their cheaper buying/holding costs.

I'd do a bit of research into Hackney which is the area of the 2012 olympics.. A few years ago when I was there it was a dump.. but I suspect it still is. I'm not too sure about how well these areas will be gentrified considering the demographic. I remember catching buses through there and feeling like I was driving through downtown Mogadishu but worth looking into..

Howdy there - good questions!

I am following your thread as have similar interests.... any further thoughts since December?

My partner and I are Aussie expats earning in the UK and wanting to invest our UK savings. Ideally we would buy in Melbourne, but with the current crappy exchange rate (£ to AU$) we've been starting to wonder if investing in the UK is a better option at the moment.

If the 25% deposit thing for IP's in the UK is strict, well that would null and void it for us - we don't have THAT much savings. We have an IP in Brissie (thankfully on higher ground!) which has equity to use if buying in OZ.

Coincidentally, we have friends living in Hackney and were considering it as a possibility (mainly because I personally like it - yes, the dreaded "heart-not-head decision"). Any opinions about buying an IP in Hackney (London) anyone? Or surrounding suburbs? Dalston?

PS: I don't know much about investing yet (my partner is more knowledgable than me) so pls forgive any inadvertant stupidity on my behalf.

alexlee said:

From my experience, agents in London don't offer full property management services like they do here. They look for tenants etc but after that, it's between the tenant and the owner. There are also UK specific issues such as leasehold / freehold and 'chain' to consider.

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Her Mr Stitchy. I am in a similar situation to you. My story is that i sold my london (watford) place in 5 years ago for 220GBP. It is still worth the same today. I bought an apartment in melbourne 5 years ago for 220GBP (like for like) and sold it recently for 660GBP (Todays value). So thats trebled my money in 5 years...good times! Obviously this is largely because the timing of the GBP vrs AUD when i bought and sold.

I never lived in my UK property. I was only 18 years old when i bought it with only 50GBP deposit (they would give anyone a mortgage those days!!). I coudn't afford to pay the mortgage....i had to get someone else who was earning a decent wage to do it for me whilst i lived in crappy rented studenty places.

I am 29 years old and still earn minimum wage 15GBP a year (thats roughly $20,000 per annum) and have done all my life. Therefore i am thinking of heading back to the uk to seek a more comfortable and more financially secure life.

Firstly, i can answer the above quote in saying yes my letting agent did deal with my tenants (i was at university in Manchester at the time so didnt have time myself). They did this for 6 years with no fuss. They got things fixed on my behalf and always made sure rent was on time. You just need to have a good relationship with the property manager...and then they will look after you.

Secondly, concerning a move back to the uk. I think you have to detach yourself from anything to do with property investing with decisions like this.For me i think it is slightly different from most people as i will NEVER attain more than a low income job (i have no need or desire to - i enjoy stressfree living and dont lead a flashy lifestyle) so the value of my property (and its future capital gains) are crucial. The above is slightly contradictory but as i said, i dont really fall into the 'normal' category. Look past the $$$$

You need to work out the quality of life (i.e. more crime, no sunshine, always freezing cold!) which will go with you're move. Job, family, friends etc etc etc. Aside from the monetary value, will you truly be happy in the UK over Australia?

Personally, I am from Bournemouth but know the Manchester market very well having almost bought there 10 years ago. Prices are high but with all the council jobs going in the uk (manchester just lost 2,000 as of last night) i feel this area will start dropping down in 2011-12. London market is always very strong and less likely to fall then other uk areas, but i'm looking for areas to fall on their **** before i buy somewhere. Probably going to sit on the money for 1-2 few years whilst the UK tries to dig itself out of the whole its got itself into.

I am now a dual citizizen and love Australia and its people and cant wait to retire out here in the future, but short term, i feel the uk is calling me back.

I wish you luck with you're decision!!

I used to have a property in Southampton.

It was an old terrace which we bought in 1988 for 50k GBP. I sold it in 1999 for 57k GBP. Hardly outstanding growth.

Last week I found a website which gave the ability to look up properties. It sold again in 2001 for 110k GBP. A mirror image next doorr sold for 125k GBP last year.

Some things here.

We bought it in a not good state of repair. We put a lot of work into the interior. It looked not too bad when we moved out in 1990.

By the time we sold it had become very run down- due somewhat to very poor property management. (We were relying on a very good hands on given the distance we were away from the property, and it did not happen). It not only needed a lot of cosmetic repairs, but there were structural problems which were potentially expensive. The person who bought it was renovating with the help of tradies in the family.

When I sold, there was a huge building boom going on in Southampton. I could see that the price had a big upside potential, but I could not keep it at that stage.

So the only real capital gain for that property was for a property which had been probably quite well renovated, and sold at the peak of a boom. In contrast, properties in Australia have grown well consistently over a number of years.

So with my experience of one single property in England, I would not buy there again, with the patchy growth and poor property management.

ive recently met a person who is from the UK and has the odd investment property over there, and we are now really good freinds,

one thing which really surprised me is this!

basically every property in the UK is neutrally geared, eg with rate between 3-6 % and yields of minimum 5%,

she said that unless you buy poorly or an extreme area, the property would be basically slightly positively geared from day 1

now ignoring currency rates, then wouldnt it be a no brainer for any local person to BUY BUY BUY, and she is contemplating picking up 4 more this year, as she believes the market has hit about as rock bottom as you can get.

Now this got me really excited, so does that mean us aussies are better investors, i mean if I found a neutral/positive geared property (without it being a serviced apartment), I would buy as many as I damn well could, and just wait for the growth!

since the exchange rate has dipped to recent lows, should I investigate picking up a few for myself?

CO, how do you intend to manage exchange rate risk? What happens if the AUD-GBP increases.

How do you intend to get finance? Locals can only get a maximum of 75%LVR for buy-to-let mortgages. And Interest rates are high 4's and low 5's. Do a quick internet serach. And I doubt non-residents would be able to access anything like that.

How about tax laws?

How about the management of the property?

hi buzz

thanks for your reply

yes i understand the risk of currency, management etc etc etc

but im rather interested in comparing property investment in the uk vs aus



according to my friend and their property agents

now is a great time to buy

with current interest rates of 3 to 4 %

and with yields of minimum 8% at all times regardless of recession or not

if the property market was like that here i wouldbe selling a kidney to get deposits organised

imagine a property msrket that no matter what you buy your rental payments would cover your mortgage at the worst case or generating you an income even if it was $20 per week

so does that mean that the australian property market is far harder then the uk

if in some way you could eliminate currency issues. Does that mean that we should ALL be buying like crazy in the uk?

Hypothetically if someone gave me say $20 million worth of property even at 100% lvr if the rental payments were covering the mortgage payments. I would jumpat that opportunity!

The only drawback ive been told is that for an ip they may only lend you up to 75% and hence requiring a 25% deposit

and with property prices fallen over the past years

apparenlty every property is neutrally geared and just about all are pos geared

The UK is a great place to invest at the moment if you are a cash investor. London, for the most part, and the South East of England are doing okay, properties are selling and prices were back to around October 2007/March 2008 prices (although it is taking a LOT longer for stock to move in private treaty sales and there seems to be more downward movement in prices). If you need to get a mortgage from a UK bank and are a non-resident you would be needing at best a 60% LVR. Buy to Let (BTL) loans in the UK are not easy to get at the moment (meaning even harder than an owner occupier loan) and the interest rate for BTL is usually above 5%. Also, if you are an Aussie resident, you will not be able to get a mortgage from a UK bank that has a branch in Australia (Lloyds TSB, for example).

If you want to get an idea of what is happening in the market a good mailing list to get yourself on is with the bigger auction houses (try Allsop Residential). Also, look at stuff like ourproperty.co.uk (their mailing lists provide sales data from the land registry - so actual sales, not asking prices). Zoopla is another good site to look at and get an idea of actual sales prices.

The England and Wales land registry provides lots of free information that allows you to compare areas and look at statistics over time if you want to see how a postcode or county has performed(http://www.landreg.gov.uk/houseprices/).

Personally, I'd stay away from the North. Even in a good market. But now that there will be such dramatic cuts to the public service, the North is about to take even more of a hammering. Housing benefit is also set to change meaning that rents from council tenants will go down.

Property management is also very different in the UK to Australia. "Full management" means they take a cut of around 14%-16% of your rent. They also claim ownership of your tenants. If you want to cancel your management agreement with the agency you will still have to pay them around 10% each month until the tenants move out. Regular inspections are not that common and I've also found that the high street agents are not that interested in maintaining the quality of your property. If you just want an agent to find a tenant its a minimum of 10% per month. If you want them to only find the tenants and collect the rent you are still looking at 12% commission. In my experience, a high street agent will require nagging and regular supervision. Lettings agents are cheaper and can be good value provided you can get a good one. Real estate agents and lettings agents in the UK are NOT regulated like in Australia. Anyone can open up a shop and say they are a real estate agent. The Residential Landlord Association www.rla.org.uk can provide you with lots of reading about issues facing Landlords in the UK.

HRMC (UK's tax office) would require you to submit a Non-Resident Landlord form requesting that your rental income be paid to you tax-free. If you do not submit this form AND get approval from HMRC your lettings agent/real estate agent will be legally required to withhold 20% of your rental income and pay it to HMRC. You can claim it back at the end of the financial year, but if you run a property that is technically (or actually) negatively geared that's not very convenient.

Group houses/share houses are referred to as houses of multiple occupation (HMO) and are a bit of a danger zone at the moment in that legislation was recently enacted that requires landlords to get planning permission from their local council if three or more unrelated people will be living in the same premises. There are a lot of conditions and requirements to meet if you let a property out as an HMO.

Another thing to keep in mind is that there is a big push for more energy efficient houses in the UK. Part of this push will include legislating to force landlords to have double-glazing, insulation, etc., in order to meet certain energy efficient levels. While grants are available for stuff like the solar panels for house roofs, it's not nearly as cheap as some groups are claiming to make a house or flat more energy efficient. Many homes in the UK still have really poor quality insulation (particularly the older places). New buildings are required to meet sound and insulation levels.

The tenants pay council tax (rates) and water.

UK banks will also require that your rent each month is 125% of your monthly mortgage payment. This has been standard practice for many years and is even more strictly applied now.

I spent around a decade living in London. I own two properties: one in zone 2, west london and the other in zone 5, south-west london. I don't regret owning them, but manage them completely differently to my Australian properties. I have been unable to refinance since moving back to Australia. In spite of the low Bank of England base rate, neither of my mortgages has an interest rate under 4%.

However, at the moment with the fantastic exchange rates of a high AUD and low GBP, it's not that expensive to send money over.

If you are not familiar with the UK market make sure you do some serious research before buying somewhere.

Property Investing is very different to Australia.

hi everyone

and a message to james

i too have recently met an expat from the uk who is quite into property investing

this is what i have been told

in the uk if you buy aroun or below the median price the yields are at a minimum 8%

with interest rates at about 4%

and if you do 75% lvrs there are many people with up to 100 properties because there is no limits to serviceability..... The only thing is you need 25% deposit

if this is the case with basically any property being posiively geared why isnt everyone doing it

if this was the case in australia. I beleieve the average somersofter would be buying 100s of properties since you are profiting from day 1.s seems like a no brainer

Property Meister said:

in the uk if you buy aroun or below the median price the yields are at a minimum 8%
with interest rates at about 4%

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No, yields are around 5% and rates over 6%. I let my London property out for a while & got 4.5% gross. The property manager took 10% in advance & another 3% ongoing. Buy to let deposits required are often 40%, and usually not available for non-residents. Rates will go up again sometime, putting more downward pressure on prices.

Property Meister said:

if this is the case with basically any property being posiively geared why isnt everyone doing it

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Investing in property in the UK is not seen as a path to prosperity as it is in Australia.
They have seen how property can fall dramatically and stagnate for long periods of time.
For example my property: 1988 Sold 85K, 1992 Sold 56K (35% drop), 1999 Sold 103K (to me), 2007 Sold 240K (by me).
It is seen as risky, and often an unethical parasitic activity. In Wales where out of town buy-to-let speculators were responsible for pushing up prices beyond locals, vigilante groups would identify these properties and vandalise them, making them less attractive to non locals. Non paying tenants can easily cost you many months rent, it takes a while to evict someone.

Property Meister said:

if this was the case in australia. I beleieve the average somersofter would be buying 100s of properties since you are profiting from day 1.s seems like a no brainer

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Like these guys
http://www.guardian.co.uk/money/2010/mar/06/buy-to-let-fergus-judith-wilson

300k AUD is 180K GBP ,not 185K

Just wonder how did you manage to save about 300k cash in your age ?
as you said you just have little salary .

If you've been to China ,you will know that China will never get slow

thanks everyone, im actually posting this on behalf of an expat friend of mine,

she's not very technically savy so im posting it up,

she would appreciate it very much if she could post up her questions

she is a UK resident with a PR here

FW----
would it be better to be borrowing in your own name or borrowing under a company name.

What's the difference?

How do you go about it?

Would you even bother, when would you do this?

ALso, about borrowing capacity, how do the banks work it out. What if you have mortgages in Australia, do they count and can you avoid including them as asset and debt amounts.
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thanks everyone, the tone is a bit cold because Im simply just cutting and pasting an email from her, so please dont take offence to it