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Finding your new home in the U.K.

The U.K. is a nation of homeowners. Most people own — or aspire to own — their home.

But lack of supply and rising prices mean this can be an expensive proposition for locals and expats alike.

These difficulties don’t seem to have slowed demand, however. For those who choose to, investing in the U.K. housing market can prove a safe and prudent decision.

Should you rent or buy?

Whether renting or buying, housing is likely to be the biggest expense. The current low interest rates mean that many people could be paying less in monthly mortgage payments than they would be in rental charges. Add to this a likely rise in the value of the property and many would consider this to be a smart move.  

If you’re only planning to stay for a couple of years, however, you may not recoup the taxes and costs that you will have to pay.

Many people choose to save money on rent and mortgage payments by living in an area with cheaper house prices. With the average cost of a house in London more than double that nationally, is it any wonder that many people buy or rent outside the capital and commute in? This also holds true for many other cities. Choosing to live outside expensive urban centres could get you a better deal.

You can also save money by organising or joining a house share. Renting a room in a shared house will be significantly cheaper. Thanks to the internet, it couldn’t be easier to find potential housemates, with sites like Spare Room and Gumtree hosting regular adverts for rooms to rent.

House price fluctations due to COVID-19 pandemic

At the beginning of 2020, housing and rental prices were trending upwards at the beginning of 2020, but this reversed in mid-2020, most likely due to the COVID-19 pandemic. According to our 2020 Global Housing Market Trends report, metrics for both the rental and housing markets in the UK increased in line with expected trends for the first data of 2020, but this reversed in mid-2020 when the impact of the pandemic reached its peak.

The metrics we analysed for the report were:

  • Price-to-rent ratio — the average cost of ownership divided by estimated rental cost. Higher values suggest that it is better to rent rather than buy
  • Price-to-income — a ratio of apartment prices to average disposable income. Lower values mean more affordable housing
  • Mortgage as a percentage of income — a ratio of mortgage costs to take-home family income. Lower values mean more affordable housing.

The percentage changes in the UK have not been as dramatic as in some other countries — the biggest drop was 2.8% for price-to-rent outside the city. These findings suggest that housing is slightly more affordable and renting is slightly less attractive in the UK.

Aetna International Global Housing Market Trends Graphic for UK between mid-2019 and mid-2020 Aetna International Global Housing Market Trends Graphic for UK between mid-2019 and mid-2020

Adam Price, Managing Director at Select Property Group notes that “as the UK’s first full lockdown gradually began to ease at the end of May, it was at this time that the property market in the UK ‘reopened’. Work on construction sites began again, many property purchases that had been delayed were completed, and viewings were permitted once more. What we saw was a huge wave of pent-up demand here in the UK. People that had, for the previous few months, made plans to buy property were finally allowed to get the ball rolling on these purchases once again.”

Adam adds that “the last few months for us at Select Property Group, couldn’t have been busier. We’ve seen strong demand from new and returning global investors looking to add UK property to their portfolios. In September 2020, for example, we sold 39% more UK properties globally compared with September 2019, with a 44% uplift in revenue.”

From these figures, we can see notable fluctuations in the housing market industry yet the demand for housing is constant and even increasing. The early 2021 data for price-to-income and mortgage as a percentage of income will be interesting to review. In summer, the government announced a temporary relief on tax when buying property (called stamp duty), making the market much more attractive for many buyers.

Where to live

Where you live in the U.K. will probably have the biggest impact on your costs. Living away from the most expensive areas will mean that you get a better deal. But it could also mean that you earn less money, as wages tend to reflect the cost of living in each area.

London and the southeast are by far the most expensive regions to live in. Higher wages and more job opportunities will always attract many people to the area. But some expats find it a financial struggle as property prices and commuting costs can easily swallow up any extra money.

The North of England, Wales, parts of Scotland and the Midlands offer significantly cheaper living costs. Expats who land a well-paid job in one of these areas may find themselves enjoying a better quality of life than their London counterparts.

Where to buy

House prices vary greatly throughout the U.K., with London and the southeast proving particularly expensive. These property values are driven by increased demand, higher wages and a wider variety of employment options.

Expats who venture further afield could benefit from lower house prices. Prices are particularly low in certain parts of the North of England although this may be offset by lower wages.

It’s also worth noting that prices are likely to be higher in popular, central areas of many towns and cities regardless of the average in that region.

What does buying a house actually cost?

House prices are just one consideration for expats looking to buy. To work out what purchasing a house will actually set you back, you’ll need to think about the taxes and costs that come with it. These will include:

  • Legal fees.
  • Land registry fees.
  • Property searches.
  • Stamp duty.

These payments will usually be organised by your lawyer — sometimes called a conveyancer or solicitor – who should be able to estimate them once they know the price of your chosen property.

If you need to borrow money to buy, in the form of a mortgage, you may be required to pay a fee to your mortgage lender. This can usually be added on to your repayment total, but will increase the amount of interest you pay over time.

In addition, you may be required to take out life, buildings and contents insurance. Finally, you’ll need to consider the actual cost of moving. This can vary greatly depending on the amount of stuff you have to move and the distances involved.

Finding a house

Expats who do decide to buy in the U.K. shouldn’t have trouble finding a suitable property. There are many websites that allow you to search your chosen areas, allowing you to see what’s available and compare prices easily. Some of the most popular include:

If you’re looking for local knowledge, it might be best to consult an estate agent. In popular areas, a good estate agent could help find a house that meets your specifications before it’s listed online, giving you an advantage in the race to buy.

As well as facilitating the sale, many estate agents also offer legal and financial services. You’re under no obligation to take advantage of these, however, and it’s a good idea to shop around for the best price or service before committing.

Making an offer

As a minimum, a house purchase in the U.K. tends to take two to three months. But it can take even longer if things get complicated, or there is a long “chain” of properties involved.

Most expats shouldn’t have a problem arranging a mortgage with a U.K. bank or mortgage broker. You will be required to a pay a deposit of at least 10% of the property value — although some lenders require up to 40% from foreign nationals.

Once you know how much you can borrow, and have found a property you wish to buy, you’ll be in a position to consider making an offer. You will normally do so via an estate agent although you may discuss this with the owner if they are selling directly.

Once a price is agreed, the conveyancing process is handed over to both parties’ solicitors who arrange for the legal searches and paperwork to be completed. If everything runs smoothly, a “completion date” will be agreed. This is when the funds will be sent to the seller and legal ownership of the property is transferred.

This system varies slightly in Scotland where all communication takes place through lawyers from the offer stage.

Getting a survey

Most lenders will require a survey of your property and can often arrange one for you. This will outline any structural or planning issues that might affect the purchase and establish a fair value for the property. If the survey suggests there are problems, or that the price is too high, you will have an opportunity to cancel the sale or renegotiate with the seller at this stage.

Buying a house can be a stressful and expensive process. Making sure you have good health insurance in place before you begin could reduce your stress levels and offer added peace of mind.

Protect your health and wellbeing wherever you live by contacting Aetna International for a health care benefits quote today.

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