Investing in a London Apartment – a Short Guide for Overseas Buyers


    If you are coming from overseas and are planning a long-term stay in London, buying an apartment (a ‘flat’ in UK English) can be a great idea. UK residential property has traditionally produced excellent rates of return, and London is globally considered to be one of the most desirable cities. In a world where savings rates have dwindled to literally nothing in recent years, buying a flat in the UK capital may be the perfect solution to give you a great place to live while producing a good return on your investment.

    However, before you’re ready to go ‘flat hunting’ in London, there are a few things you should know. For sure, it wouldn’t be the Britain we all know and love if there weren’t a few particularities involved, and the property market in England certainly has plenty of those!

    What is leasehold ownership?

    Let’s start by taking a look at a quaint concept of property ownership you will come across. English law makes an important distinction between freehold ownership and leasehold ownership. Houses are typically sold on a freehold basis, meaning you own the building and the land upon which it stands. Flats are almost exclusively sold on a leasehold basis and this is where it gets interesting. 

    A lease is an important legal document that grants the right to occupy the property long-term for a set amount of time – often 99 years, 125 years or sometimes 999 years. A long lease is a perfectly marketable title but it does not confer an interest in the building, which the freeholder retains.

    A leasehold flat is a ‘wasting’ asset in the sense that the value of the property will decrease as the lease runs down until ultimately, in theory at least, property ownership reverts back to the freeholder. That said, once the flat has been owned for at least two years, the lease can be extended. “The Leasehold Reform, Housing and Urban Development Act (1993) gives flat owners the right to extend their lease by 90 years, and a reduction of their ground rent to ‘a peppercorn’ (zero),” explains one London property specialist.

    Increasingly, leasehold flats are being sold with a ‘share of freehold’. In practical terms, however, the ownership of the apartment will always be governed by the terms of the lease. This includes an annual service charge paid to whoever manages the building (typically the freeholder or his managing agent) for day-to-day repairs, maintenance and cleaning of the building and communal areas.

    How does the buying process work?

    First, get your finances in place so that you can become an active property buyer. Contact local estate agents or look on Rightmove and view all possible contenders. When you’ve found a flat you wish to proceed with, approach the estate agent with an offer (verbally or in writing) in the region of the asking price; be prepared to negotiate until a price has been agreed.

    At this point, you need to instruct a conveyancing solicitor who will carry out the legal work around the sale (including the contract for the transfer of ownership). Interestingly, the transaction is not legally binding until contracts have been exchanged – which can make for a stressful period and many potential things to go wrong!

    This is also a good time to commission an independent property surveyor to check the condition of the flat, including any possible maintenance and repair costs. Property transactions in England still largely operate under the principle of ‘buyer beware’. This puts the onus on you to ask all the right questions and get the answers you need. Assuming there are no major problems to derail the sale, you’ll receive the contract for signing and exchanging with the seller, and agree on a date for completion. Following completion, you’ll get the keys to your new London home.

    You can expect the whole process of buying a flat in London to take around two to three months, or possibly longer if you’re part of a ‘chain’ of buyers and sellers waiting on the purchase or sale of other properties.

    What about Brexit?

    There are no restrictions on who can buy a property in London, whether you are a UK citizen or a foreign national. Since Brexit, sterling has dropped in value which is good news for overseas investors as it makes funds go further. No wonder, then, there’s been a lot of expat activity, particularly from the USA and the UAE.

    London, in particular, has always been a haven for property investment around the world. It’s a vibrant metropolis with strong employment and a history of multiculturalism, which makes it a safe choice for investors from across the globe.

    Sterling’s relative weakness on the international stage has also meant that flats in London can be acquired at competitive rates, especially for those holding US Dollars or Euros. Now may well be an excellent time to put your money into London real estate.

    This is also a good time to commission an independent property surveyor to check the condition of the flat, including any possible maintenance and repair costs. Property transactions in England still largely operate under the principle of ‘buyer beware’. This puts the onus on you to ask all the right questions and get the answers you need. So, having a qualified building surveyor look at the property on your behalf is strongly recommended.