Chris Frame, Head of Partnerships at GetGround, reflects on the reasons behind months of consecutive growth in limited company buy-to-let across Hong Kong and Singapore.
British property investors aren’t the only ones enticed by the potential of an investment in bricks and mortar. While international investors may not engage as emotionally in the UK property market, the tangible nature of investing in buy-to-let continues to have great international appeal.
And the figures attest to this: the number of homes in England and Wales owned by foreign buyers has almost tripled in ten years: today, close to 250,000 (1%) of residential properties are registered to individuals living abroad.
According to the Financial Times, two thirds of UK property purchased by overseas buyers comes from just a dozen countries. Hong Kong topped the list of the single largest source of buyers. Right now, more than 23,000 homes in England and Wales are owned by Hong Kong residents - a dramatic increase from 2,170 homes in 2010.
The growing appeal of limited companies
At GetGround, as specialists in the setup and management of buy-to-let limited companies for UK property, we’ve witnessed similar growth. Overseas investors are continuing to recognise the efficiencies and ease associated with investing through a limited company, rather than their personal name.
In February 2022, GetGround incorporated 65% of all buy-to-let limited companies in which the lead shareholder was a Hong Kong resident. And the market has in more recent months continued to expand: with over half of buy-to-let limited companies in this region continuing to be set up by GetGround customers. In Singapore, we’re seeing similar trends, ranging from 33% to 70% per month in the first quarter of this year.
So what’s behind this growth? We’ve outlined some of the reasons our overseas customers continue to invest in UK property.
Despite the headwinds of rising inflation (currently at 9% in the UK - a forty year high) and the cost of living crisis, the UK property market remains popular with international investors.
Coinciding with the Queen’s Jubilee celebrations, Savills released compelling data on the long-term inflation-beating potential of the market and the results of this seventy year comparison are striking. In 1952, the year the Queen came to the throne, the average cost of a UK property stood at just under £2,000 (equivalent to £56,000 in today’s money). Over the next seventy years, house price growth has averaged 2.2% per annum above inflation, every year.
When it comes to landlord sentiment today, a recent study by GetGround of hundreds of UK landlords revealed that investing even partially through limited companies helps landlords to mitigate the impact of rising inflation better than if they were to invest in property in their own names.
Three quarters of those surveyed (76%) said that limited companies allowed them to adjust more easily to rising inflation, while a similar proportion (73%) revealed that limited company investing made them feel more protected.
And the attraction is heightened when compared to the investment opportunities for APAC investors closer to home. In contrast the Singapore government has over recent years introduced a number of cooling measures to dampen the heat of the property market. The additional buyer's stamp duty (ABSD), charged on second and subsequent residential property purchases for Singapore citizens, targets investors with a 25% stamp duty tax on any investment property. This will increase to 30% for third and subsequent properties. Measures that, over time, have caused investors to look further afield.
The UK continues to offer great value opportunities for investors up and down the country. At GetGround, we’ve seen overseas buyers taking a wider interest across the UK’s towns and cities, expanding in some cases from a London-only search to invest across Britain, with Cambridge, Manchester, Birmingham, Liverpool, York and Reading, to name just a few, emerging as property hotspots amongst international buyers.
The impact of Covid
The effects of the pandemic over recent years have limited the ability for overseas investors to experience the potential of the UK property market for themselves. In an unpredictable environment of consecutive international travel bans, the ability for overseas investors to find new ways to engage in the UK property market from afar has been critical.
The ease at which international investors can now access buy-to-let investing via a limited company structure has made the returns associated with UK property easier to replicate, whatever your location across the world.
At GetGround, our buy-to-let platform solves many of these issues for international investors. By taking care of the core elements of setting up and structuring a limited company, for instance the setting up a business account (to manage payments in and out of their buy-to-let investment), to completing legal documents online (and not in person), we’ve removed many of the barriers that just a couple of years ago would have made the ability to become a UK landlord from afar difficult - if not impossible - to achieve.
Seeking out specialist advice
Despite the apparent ease of UK limited company setup, the need for on the ground specialist advice remains strong. It’s why at GetGround we invest in our people, stationing our team across APAC to help overseas property investors to understand the limited company opportunity for themselves.
Interested in using a limited company structure for your next buy-to-let property purchase, or looking to assist your clients in doing so?
Get in touch with our specialist team to find out more: