OTHER ESSENTIAL INFORMATION ABOUT LIVING IN THE UK
BUYING A HOME IN THE UK
James Hickman considers whether this is the time to buy
One estate agent I spoke to recently said that nearly a quarter of his new applicants are Americans seeking to buy a property in prime central London. That is an astonishing figure, especially when you consider that as recently as 18 months ago, droves of American were selling up in London to move back to the US. Why the change? It is the exchange rate, of course.
In 2007 when the rate was two–to–one, many Americans took advantage of this, sold their property at the peak of the market and transferred their funds back to the US. The US property market was beginning to wobble and consequently, those flush with dollars could purchase a substantial home back in the US.
Two years on and the landscape is vastly different. The UK housing market is now depressed and the US dollar is at its strongest against Sterling in nearly 15 years. In fact, the dollar has not been this strong since Britain pulled out of the European Exchange Rate Mechanism in 1992. What is more, the problems with the UK housing market are generally acknowledged to be temporary and in time, prices are expected to recover.
Those with long term placements in Britain are naturally tempted to buy. Simply put, Americans have been priced out of the British – and especially the London – housing market until very recently. For those who are planning on staying here for five years or more, buying could make sense but property is never a one–way bet and at best, must be viewed as a long–term investment. The longer the placement, though, and the more sense it may make.
If you are tempted to buy here in the UK, remember that the process here can be expensive. Stamp duty of four percent of the purchase price applies on all homes over £500,000 and other expenses such as legal fees, title searches, and removal firms add up quickly. When you come to sell the house, also bear in mind that the process can be equally expensive and also can take a lot longer than it does in the US. Recent legislation requires sellers to prepare a Home Information Pack before they can market the property and the time between an offer being accepted and a transaction completing can take many months. If you anticipate having to move quickly due to job requirements or similar, it will be hard to make a quick getaway.
It is also worth checking with your employer if you receive a housing stipend. Some companies require the stipend to be paid towards rent rather than a mortgage so ask your Human Resources department if this is applies to you. Securing a mortgage can also be problematic for ex–pats as many lenders are wary of handing over money to someone who could easily escape abroad, leaving unpaid debts. However, a specialist mortgage broker can put you in touch with lenders who are willing to provide mortgages to foreign nationals.
The pound has recently been valued at between $1.41 and $1.45. It is anticipated that the pound will strengthen on the back of grim US economic data and a report showing the UK consumer confidence was up. Just because now seems like a good buying opportunity does not mean you should, though. Evaluate your current needs and your long term plans to see what is right for you. There are some relatively cheap properties to be had but it could prove very costly in the long run if a home in the UK is not what you need.
James Hickman is the managing director of Caxton FX, one of Britain’s leading foreign exchange companies. www.caxtonfx.com 0845 658 2223.