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Falling UK house prices and steeply rising rental yields spurs expat buy to let enquiries, reports broker

The August report on UK property market activity published by the Royal Institute of Chartered Surveyors (RICS) is suggesting continuing weaker UK house sales data, as  high mortgage rates deter buyers, whilst at the same time, rental prices surge, as tenants enter bidding wars for the few properties available to let. In other data published by the UK government in September, property sales were 16% lower than in August last year, suggesting a buyer’s market.

In its report published in September 2023, the UK Office for National Statistics cited private rental prices paid by tenants in the UK rose by 5.5% in the 12 months to August 2023, up from 5.3% in the 12 months to July 2023. Annual private rental prices increased by 5.4% in England, 6.5% in Wales, and 6.0% in Scotland in the 12 months to August 2023.

Online expat mortgage broker spokesman Guy Stephenson of  Offshoreonline notes, “We have started to see a significant rise in UK expat buy to let mortgage enquiries, now expats are beginning to sense the UK housing market stabilising. Although the media has widely reported the steeply rising UK Base Rate and the impact this has had on house sales activity, in fact we are now seeing mortgage rates return to the more normal levels that existed before the financial crash in 2008. However, at the same time, demand for rentals is surging, making the business case for expat buy to let buyers in the UK more attractive.”

This trend is supported elsewhere, with Rightmove, a property portal, reporting strong demand for rentals, with prices hitting new peaks, driven by an average of 30 potential tenants viewing London properties, whilst outside of London, the figure is around  20 per property. According to Rightmove, national average asking rents outside London hit a new record of £1,231 per calendar month (pcm), making them over £300 (33%) more than in pre-pandemic 2019. Average asking rents for new tenants in London also reached a new record of £2,567 pcm. Rightmove adds that homes are continuing to let at speed, with the current time to find a tenant at its quickest since last November, despite a slight easing in the gap between demand and supply.

The net effect of higher rentals also impacts mortgage loan stress testing,  which expat buy to let mortgage brokers have to carry out for every applicant. Stress testing dictates the amount a bank can lend for a given rent, so the higher the rental, the more can be lent. Higher rents also mean that the same loan amount  now becomes easier, despite a background of higher expat mortgage interest rates. Stephenson ends, “If weaker domestic sales demand now allows an expat buyer to negotiate a discounted house price to partially offset higher mortgage costs, that’s a win win for the expat buy to let investor.”

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