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Are you competing against overseas buy-to-let investors in the UK property market?

3-minute read

Are you competing against overseas buy-to-let investors in the UK property market?
Mollie Millman

Mollie Millman

18 July 2017

We often hear about British landlords coming head-to-head with overseas-based investors who are looking for a slice of the lucrative British buy-to-let market.

However, new data suggests the competition from overseas is no longer as strong as it once was.In fact, the proportion of overseas investors has hit a record low, according to figures by Countrywide.

Overseas investors owned 5 per cent of homes let in Britain in 2017, down from 12 per cent in 2010.

Overseas buy-to-let landlords drop 15% in London

London has seen the largest fall, with one in 10 homes let this year owned by an overseas landlord, down from one in four in 2010.

However, this isn’t true of the wealthiest parts of the capital, where the number of overseas landlords is still more than one in five. This percentage has also dropped, though, from 31 per cent in the last seven years.

Asia-based landlords overtake Europeans in London

The number of European-based landlords has been gradually falling over time, more so than landlords from any other continent.

In 2010, they made up 39 per cent of all overseas landlords in London, but now account for 28 per cent. They were the biggest group of overseas investors in London until 2014.

Asia-based landlords are now the biggest group of all overseas-based landlords in the capital at 33 per cent, followed by Europeans at 28 per cent, North Americans at 10 per cent and Middle Eastern at 9 per cent.

Outside of London, Europeans remain the biggest group of overseas landlords at 37 per cent.

South East has most overseas landlords after London

The proportion of overseas-based landlords has fallen in every region across Great Britain since 2010. London has always had the highest proportion - currently 11 per cent of landlords based overseas - followed by the South East at 5 per cent.

Outside London and the South East, less than 5 per cent of homes are let by an overseas landlord. Scotland, Wales and the Midlands have the lowest proportion at 3 per cent.

Do overseas-based landlords earn more?

The short answer is yes. The earnings of an average overseas-based landlord was 35 per cent more in rent last year than one living in the UK.

Their earnings reached £5.4billion in rent in the last 12 months, 11 per cent of the £50.6billion paid by private tenants in Great Britain.

More than half the income of overseas landlords came from rental homes in London.

However, these figures don’t take into account the number of properties owned – overseas landlords tend, on average, to own more properties than those in the UK.

Growth not driven by overseas landlords “since 2010”

The average price of a new let in Britain rose by 1.1 per cent year-on-year in June 2017 to stand at £950 a month.

London was the only region to see rents fall year-on-year (-0.8 per cent).

The South West recorded the strongest rental growth of 4.6 per cent, the biggest year-on-year pickup since November 2015.

Johnny Morris, research director at Countrywide, said: “The growth of the private rented sector since 2010 has not been driven by overseas investors.”

However, he added: “A steady increase in foreign investors’ tax bills combined with more recent falling expectations of price growth in London has led to a decline in foreign investment in buy-to-let.

“As well as having to contend with increased stamp duty and the annual tax on enveloped dwellings, overseas investors also saw the removal of capital gains tax exemptions in 2015.

“Rental growth remained at 1.1 per cent in June. Falls in London were offset by higher growth across the rest of the country. The fall in the capital was driven by lower rents in the outer areas of London as the ripple effect from falling rents in Central London continues.”

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