Investing in UK property from the UAE
In this guide we will talk you through everything you need to know about investing in UK property if you are from the UAE.
Why invest in UK property from the UAE?
The current housing market in the UAE is somewhat unstable, to say the least. Interest rates in the region are constantly rising in an environment where mortgages are flourishing, leaving the housing market to become more and more unpredictable as monthly payments experience extreme rises upon completion of a fixed term period. This unsustainability within the UAE market has seen a lot of investors in the area turn towards UK property as a safe haven for their investments.
As economies and property markets across the globe plummeted after the Coronavirus pandemic, the UK market didn’t just remain stable but actually soared to unprecedented heights. Even in the aftermath when many property experts forecast a sharp drop in house prices, UK property continued its upward trajectory to reach record-breaking levels.
In 2022 alone, house prices increased by 10.3% throughout the UK and rents increased by an impressive 4% (4.2% when you take out London), and neither look set to slow down anytime soon according to real estate agents JLL. In their ‘UK Residential Forecast‘, they predict that house prices throughout the UK are set to increase by 8.9% in the 5 years to 2027, whilst rents are set to increase by an incredible 15.9%.
With this impressive forecast, paired with a favourable exchange rate, investing in UK property from the UAE offers an excellent way for investors to secure their funds in one of the world’s most stable yet lucrative investment classes.
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 UAE 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 individuals.
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 from the UAE?
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 purchase to comply with UK anti-money laundering and fraud laws. These checks will usually be conducted by solicitors, banks and the agent you purchased 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 the ready from the start in order to avoid any unnecessary delays in the process.
Do I need a visa to invest in UK property from the UAE?
You do not need a visa when investing in UK property from the UAE or anywhere else in the world. As long as you have the required documentation and identification mentioned in the section above, all non-UK residents can legally purchase property in the UK up to the value of £2 million. Anything more than £2 million and you may apply for a tier 1 investor visa. 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.
Can I get a buy-to-let mortgage when investing from the UAE?
It is possible to get a buy-to-let mortgage when investing in UK property from the UAE, but the process can be challenging. Many lenders are unwilling to lend to a non-UK resident, and those who do will usually require a larger deposit and charge you higher interest fees.
Where in the UK should I invest?
The UK is home to a plethora of buy-to-let hotspots. Whilst the London market still proves to be resilient and is on the up following the effects of the pandemic, many investors are turning to northern cities. Cities such as Manchester, Liverpool and Leeds have proved to be extremely lucrative in recent years thanks to their lower price points and higher rental yields.