Buying UK property

Insights and hotspots for investors

Considering buying a home of your own or a buy-to-let property in the UK? Here’s an update on property hotspots – and wider market trends – before you invest.

To help you consider your options, our recent Property Predictor research highlights areas where house prices and rental incomes may continue to increase in the next 3 to 5 years1.

Plus, we’ve summarised some changes to tax rules and mortgage lending criteria that could affect your plans.. 

Variations in house price growth

The average house price 5 years ago in the UK was about £170,000, compared with £224,000 today, figures from the National Office for Statistics show2.

Our research predicts this trend is likely to continue, amid growing employment and investor confidence. House prices will continue to rise, albeit at a much slower pace than before, with an average increase throughout the UK of 6.1% by 20211.

However, certain parts of the UK could see more of an increase than others.

Among the highest-ranking locations are Richmond-Upon-Thames in Surrey, with values expected to rise 39.1% by 2021.

Values in St Albans in Hertfordshire are expected to increase by 38.8% and those in Camden in north London by 33.9%.

South Northamptonshire and Warwick, in the East and West Midlands respectively, are both expected to see price rises of between 29% and 30% with stronger household incomes and, in the case of Warwick, a high business start-up rate.

Just remember that the Barclays UK Property Predictor provides our forward-looking view of how house price performance might turn out. It is not a guarantee of what will happen. House price rises could be more or less than our predictions and there might be falls in value.

Applying for a mortgage

It’s worth noting that lenders have so far not changed their policies ahead of Brexit for EU nationals, and are not expected to do so in the immediate term.

However, one concern for borrowers who have been living overseas during the past 5 years is their credit record. Borrowers usually need a few years of credit data on record to strengthen their mortgage application.

If you have only been living here for 1 or 2 years, there will be limited data on your credit report, which could mean it takes longer for a mortgage lender to assess your application. 

Find out more about your credit score.

Consider tax increases

The tax environment has changed significantly, particularly for investors, where the government has introduced a stamp duty land tax surcharge of 3% on all second homes and buy-to-let properties. It is also reducing the amount of tax relief that investors can claim on their mortgage interest payments.

Any investor who has 4 or more mortgaged rental properties – or a 'portfolio investor' – will be subject to new underwriting rules from 1 October 2017. The new rules mean borrowers may need to supply more information as part of the buy-to-let mortgage application process. We're launching a new portfolio landlord proposition before the changes take place.

Owning a buy-to-let property through a corporate structure could also change your income tax and capital gains tax position, in relation to the income or gains generated on that property. You should take advice before considering this option.

There are also more tax considerations if you have recently returned, or moved, to the UK.

Tim Walford-Fitzgerald, from accountancy firm HW Fisher & Company, warns that someone returning to live in the UK may face the 3% stamp duty land tax surcharge when they buy their new home if they already own a buy-to-let.

"If the newly arrived investor has been renting their home rather than owning it, then they will not be able to benefit from the relaxation of stamp duty for those replacing their previous main residence," he says.

Similarly, he warns that if you own a home overseas but decide to rent it out rather than sell it, regardless of whether you own any other UK property, you could also face that 3% hike in stamp duty land tax.

With everything happening in the fast-paced UK property market, it is essential to keep abreast of these changes before you invest.

Bear in mind that tax rules may change in the future and we don’t give tax advice. Always seek independent financial advice. And remember that your home may be repossessed if you do not keep up repayments on your mortgage.

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