Why Invest in UK Property from Nigeria?
The Nigerian property market has had a tough couple of years. After an excellent 2019, the pandemic caused a massive decrease in demand after job losses and salary cuts prevented many from renting better apartments or purchasing new homes. As a result, the market’s boom came to a halt. Whilst things are starting to stabilise once again, the interruption in momentum has seen ROI decrease significantly and left many Nigerian investors turning towards UK property.
Investing in UK property is widely considered to be one of the lowest-risk investments in the world. The market has performed extremely well year after year, even reaching unprecedented heights in the last couple of years after the coronavirus pandemic. Spurred on by a severe lack of stock paired with an unwavering demand for rental properties across the country, UK buy-to-let has experienced exponential growth in recent years, which is set to continue.
According to JLL, property prices in the UK are set to see an increase of 8.9% in the next five years, whilst rental growth is also set to hit an extremely impressive 15.9%. This forecast, paired with ever-increasing tenant demand across the country, makes UK property one of the best investment opportunities around.
Investing in UK property from Nigeria is an excellent way to diversify your investment portfolio with one of the most consistent and lucrative forms of investment across the world – and we’re here to talk you through everything you need to know about the process.
House prices in the UK have increased by over 10% annually for the last 2 years.
Property prices in the UK are set to increase by an impressive 8.9% in the 5 years to 2027 (Savills, 2022)
Rental growth in the UK is set to increase by an impressive 15.9% in the 5 years to 2027 (Savills, 2022)
What are the tax implications for overseas buyers investing in UK property?
Stamp duty land tax (SDLT)
Any non-resident who purchases a property in the UK will be subject to both the standard stamp duty land tax rates, as well as an additional 2% surcharge. Click this link to see the most up-to-date SDLT rates.
Non-UK residents who purchase a property in the UK will be subject to inheritance tax. On death, 40% inheritance tax is levied on the value of all UK situated assets for non-UK domiciled individual’s.
ATED is a yearly tax payable by companies that own residential property with a value of more than £500,000 in the UK. For the most up to date ATED rates, visit this link.
Capital gains tax
Capital gains tax is a tax on the profit realised on the sale of a non-inventory asset and is required by both UK and non-UK residents upon the disposal of residential property in the UK. Visit this link for the most up to date rates.
Any rental income you earn on your UK investment property will be subject to income tax. This can be paid in two ways – either earn your income in full and then pay tax through a self-assessment tax return or allow your lettings agent or tenant to deduct the tax automatically. For up to date income tax rates, visit here.
What documentation do you need to invest in UK property?
When it comes to investing in UK property from abroad, there are a few forms of documentation that are required before you can move forward with the purchases to comply with UK anti-money laundering and fraud laws. These checks will usually be conducted by solicitors, banks and the agent your purchase through. These documents include:
- Proof of identity – your passport or driving license are ideal
- Proof of address – a bank statement, utility bill or driving licence are required
- Source of funds – Payslips, tax returns and proof of benefit are among the documents that can be used as proof of source of funds
These documents may be requested at numerous stages throughout the investment so it is important to have them ready from the start in order to avoid any unnecessary delays to the process.
Do I need a UK bank account to pay for the property and receive my rental income in Nigeria?
No, you do not need a UK bank account to pay for your property or receive your rental income. You do, however, need a domiciliary dollar account in Nigeria so you can purchase the property and receive income in dollars. This is because you cannot transfer Naira to the UK. It is important to note that buying a property in the UK does not make you eligible for a UK visa, this is an entirely different process.
How can I appoint a UK solicitor?
We can assist you in appointing a UK solicitor. Having been in the buy-to-let industry for almost 20 years, Knight Knox has a panel of recommended firms who are well versed in the intricacies of buy-to-let property investment. Once you have decided on which solicitor to use, they will require you to sign an instruction letter to confirm their appointment.
Is the investment fully hands-off?
After investing in a property in the UK, you are now a landlord, and as a landlord, you have a multitude of responsibilities that can be extremely overwhelming. There are, however, alternative management methods and we recommend using a lettings agent. Lettings agents offer full property management services, allowing the landlord to take a step back from wherever they are in the world