UK Overseas Investment in Commercial Properties


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29 Nov 2018

The proposed additional stamp duty on UK properties targeting foreign buyers has forced some to finalize deals before March 2019. The tax has been proposed to help tackle social issues and homeless crisis. Investors in UK properties will have to pay additional tax that will, eventually, penalize foreign buyers. Currently, a number of Middle East buyers are seeking properties in Europe where key cities for investment are Amsterdam, Paris, Copenhagen, Brussels, Luxembourg and London. Office development and refurbishments are some of the top choices, and other asset class includes hospitality, privately rented, student buy-to-let and care homes.   Some of the key EU markets are getting at least three to five bidders for deals in the range above €500m, and 10 to 15 bidders for properties in the range of €100m or below.  

In the last months Abu Dhabi based banking client financed the $32.2 million property in Leeds. Gulf buyers invested in Aberdeen up to $60 million in the year earlier. As per Savills reports the demand is expected to grow, annually, up to 80 per cent from Q1 to Q3 in cities like Ireland, Greece, Portugal, Poland etc.

Growth in opportunities  

Study finds more than 50 per cent of the investments in residential properties are coming from overseas, and increase in stamp duty can impact the sale of such properties. Also, it will have adverse impact on the buy-to-let sector. This year the devaluation of currency led to rise in the number of international buyers who were buying to diversify, taking advantage of the low entry costs, and expected spike in returns in the subsequent years.  

The market provides enormous opportunities to both local and international buyers due to growth in rental demand and student accommodation. Overseas buyers are investing in the capital city or tourist locations e.g. seaside, or buy-to-let. 

Study finds 70 per cent investments made in the capital city are for rents. Industrial rental properties continue to perform better than other commercial properties. It is expected the industrial rent will grow at the rate of 3.7 per cent in 2018 and may slow to 3 per cent in the next year. 

Developers are not committing to new projects 

Due to confusion over Brexit many developers are not committing to new property developments and the future of multiyear project remains unclear. Most developers are facing the dilemma whether to build or not, due to unpredictability over Brexit. Developers are trying to secure tenants before starting up new developments and this can lead to undersupply, as the demand will grow gradually. 

For investing safely in commercial properties, one should choose the right locations. A well populated region, connected to key cities through appropriate transportation links and employment opportunities can fetch tenant easily. One can examine the local property trends instead of scrutinizing nationwide. Some can get discounted properties in the local markets where high cost of management and market, may not be required. One can diversify into various markets and types e.g. student accommodation, residential, commercial, hospitality etc, to reduce risks.     

To know more about UK properties, click Hamilton International Estates (www.hamiltoninternationalestates.com). 

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