Step-by-step guide to buying property in the London
for Hong Kong homebuyers & investors

Arranging your finances

Following these steps will help you stay ahead when planning your finances and preparing for the purchase:

• Deposit ready: This is the first payment you'll make to reserve your London home, so plan your finances and have this amount prepared in advance.
• Documentation: Banks or lenders will require several documents to process your mortgage if and when you apply for one. Have all the income proofs and financial statements ready for your mortgage approval.
• Bank payments: For property transactions in the UK, you will need to ensure you have a UK bank account or a bank that lends internationally.
• UK Mortgage: If you are applying for a UK mortgage, it is advisable to secure such financing while still in Hong Kong to avoid rebuilding financial history in the UK.
• Loan-to-Value: You should know that a higher loan-to-value ratio for your property means higher interest rates, increasing the long-term expense on your asset.
  Acquiring the services of a specialist broker with knowledge specific to the needs of Hong Kong residents and expertise working in the UK property market is always beneficial. For instance, they will have access to the entire lender market, bank quotas for new builds, and online portals of different lenders.

Mortgage eligibility

• For BNO visa holders: To qualify for a mortgage in the UK from Hong Kong, you can prove your BNO status by providing proof of full-time employment, with at least 1-2 years left on your visa and a mortgage deposit ready.
• For non-BNO: You can still acquire a mortgage without a BNO visa by seeking the help of a specialist mortgage lender. However, if you plan to live in your UK property, you must have a residential status in the UK.
• Mortgage details: While most UK lenders will insist on a deposit of at least 25% for foreign nationals, it's advisable to have a deposit of more if possible. Mortgage options include fixed-rate and tracker mortgages, with the minimum mortgage size being £50,000. While it is possible to get up to 85% loan to value, you will need to ensure your bank can do international mortgages, if you do not have access to a UK bank.

Documentation

As a buyer or investor from Hong Kong, you will need the following documents to purchase a property in the UK:

• Proof of identity: A current passport is acceptable (no need for a valid UK visa).
• Proof of address: Documents such as utility bills, driver's licence, bank, building society or credit union statements, and tenancy agreements are acceptable as proof of address. However, whichever document you provide must be dated within the last three months.
• Proof and source of funds: While bank statements from the last three to six months are valid proofs of funds, you will need to establish the source of funds by providing extra proof. These include income from a salary, business income, gifts, fixed deposits, the sale of real estate, the sale or liquidation of an investment portfolio, company profits, dividend payments, inheritance, insurance policies, retirement income, etc.

To ensure all documents are accepted, you must get them certified by an active property professional such as an attorney or qualified lawyer, solicitor or licenced conveyancer, notary or chartered accountant.

Narrow down your search

We have access to a massive inventory of listed properties for sale in London and can help you find the right one. However, you first need to be clear on a few parameters such as:

• Reason for purchase: Whether you intend to purchase for self-use or as an investment for generating rental income.
• Location and size of property: London has 32 Boroughs, each with distinctive features and amenities. As a diverse property market, London offers a wide range of property options from stylish studios to luxurious penthouses and everything in between. Helping you find the right property is easier if we know what you're looking for.
• Resale or new-build: From classic Victorian houses to modern state-of-the-art developments, London has it all. Read about the benefits of investing in both types to make a more informed choice.

When buying a property in London, it is important to understand the difference between leasehold and freehold. While freehold property owners own both the residence and the land on which it stands, leasehold ownership is different. Many homes in London are leasehold, but this doesn’t mean you don’t own them. A property is leasehold when multiple people live under the same roof and share the costs of maintaining the building’s structure, roof, and communal areas.

New developments typically offer leases ranging from 125 to 999 years, though lease lengths can vary.

Know your budget

There are quite a few expenses in addition to the purchase price that you need to factor in when buying a property in London. These costs include:

Purchase price: This is the price paid solely for the property (after applying any discounts) to the developer or seller. This will include both the deposit amount as well as staged or lump sum payments made after that depending on whether it is a ready or off-plan property.

Mortgage fees: If you seek a mortgage, there are a few extra fees associated with such as arrangement fees, booking fees, and valuation fees, which vary depending on the lender and mortgage terms.

Legal fees: A UK-based solicitor is required for all property transactions in London to prepare contract drafts and handle legal obligations. Their service fees can range from £1,800 - £4,000 depending on property location and its value.

Stamp Duty Land Tax (SDLT): For non-UK residents, the following tax bands apply based on property value:

• £300,000 property: 6.67% tax (£20,000)
• £500,000 property: 8% tax (£40,000)
• £700,000 property: 8.57% tax (£60,000)

Maintenance charges: For leasehold property owners annual ground rent (approximately £200 - 600) and annual service charges are applicable. This must be paid annually to the developer or freehold owner as maintenance charges.

Miscellaneous disbursements: You may need to keep another £500- £700 (approx.) aside for a few miscellaneous expenses such as transaction handling charges, developer's solicitor engrossment fees, insurance, search or due-diligence fees etc.

Furnishings: While this is optional, most properties in London are brought for either self-use or as a rental investment and in either case furnishing will be needed for which a budget needs to be decided.

Viewing & shortlisting properties

Viewing properties is crucial in making informed decisions. With 21 branches across London and a dedicated team in Hong Kong, we can arrange both physical and virtual viewings for you, your friends, or family, even if you can’t be there in person.

• Physical viewings: Our team of local property experts spread all across London can arrange in-person property tours for you. Once we receive your travel dates to London, we will create a tailored itinerary for guided physical tours of the properties you have shortlisted. These viewings will provide you with a firsthand experience of the properties, allowing you to explore their amenities and assess the surrounding areas.
• Virtual viewings: We can also arrange a virtual tour of properties using Zoom or WhatsApp video calls. We offer customised virtual tours that include sharing photos, videos, floor plans, apartment options, and views from the apartments and the building.

Sending an offer & reservation

Once you've decided which property you would like to purchase, we will share your offer with the developer or seller and assist you with the process further. Before you send your offer, there are a few important things you should know:

• Existing or ready properties: When you are buying a pre-owned or finished property that is ready for possession, you need to pay the full amount when you make an offer and sign the contract.
• Off-plan or under construction: For properties still in the planning or construction stage, you can reserve the unit of your choice by paying a small fee upfront, also known as the token amount. This payment will reserve the property against your name and you can make the remaining 10% payment during the exchange of contracts which typically takes up to 28 days.

Instructing the solicitor

All property transactions in the UK require a solicitor. We can connect you with independent lawyers specialising in property deals and provide a list of skilled solicitors or conveyancers. Once you book a property, your legal representative will handle all paperwork and ensure your rights are protected during the purchase process.

The documents required by your solicitor will include:

• Proof of identity: A current passport (a valid UK visa is not required).
• Proof of address: Acceptable documents include a utility bill, driver’s licence, bank statement, building society statement, credit union statement, or tenancy agreement. The document must be dated within the past three months.
• Proof of funds: Provide 3-6 months of bank statements from the account used to purchase the property.
• Supporting documents: Additional documents are needed to show the source of funds. These may include evidence of income from employment, business, gifts, savings, property sales, investment sales, or other income sources.

Acceptance of the offer

Once the seller accepts your offer, the next steps are to pay the reservation fee and sign the reservation form. After reserving the property, your lawyer will begin preparing the documents for the contract exchange. Here are some tips to ensure this process is executed smoothly:

• Stick to the timeline: Contract exchange typically occurs within 28 days of reserving the property, or as agreed upon during the reservation process.
• Deposit ready: Ensure you have easy access to the deposit amount and have it ready when signing the contract.
• Final payment: Be prepared to cover the total purchase amount (minus the deposit already paid) upon completion of the property deal or on the agreed possession date for off-plan properties.

Conveyancing

Conveyancing in the UK involves your solicitor managing the real estate transaction. The process generally includes the following steps:

• Title deed: The seller's solicitor provides a copy of the Title Deed to your solicitor, outlining the property's legal terms and conditions.
• Documentation: Your conveyancer handles all necessary paperwork, addressing any inquiries or concerns and ensuring your interests are protected throughout the process.
• Local searches: Solicitors conduct searches in the local area to gather essential information about the property and its neighbourhood, including inquiries about amenities, furniture, and other relevant details.

Exchanging contracts

Until this point, the progress made by both the buyer and seller was not legally binding. However, once the contracts are exchanged, both parties are legally obligated to adhere to the agreed terms and conditions.

Here are some crucial things to note when exchanging contracts:

• Timeline: Contracts are usually exchanged 28 days after the property is reserved.
• Deposit payment: Upon contract exchange, the agreed-upon deposit, typically 10% to 20%, must be paid.
• Off-Plan properties: For off-plan or under-construction properties, payments are made according to previously arranged schedules that could be linked to construction milestones.

Property inspection (snagging)

As an overseas property buyer in the UK, it is essential to inspect the property before moving in. This process, known as snagging or pre-inspection, ensures that any issues or defects are addressed before you take ownership.

Here's how the snagging process goes:

• Inspection meeting: The builder typically arranges a meeting to inspect the property. A list of any problems, such as paint stains, broken doors, or water leaks, is compiled and provided for necessary repairs or improvements.
• Property features demonstration: During the inspection, the developer will explain the features of the property, including central heating, hot water systems, lighting, switches, electrical consumer units, and other items.
• Identifying issues: Any defects or shortcomings identified during the inspection can be reported to the developer for prompt resolution.

Completion of purchase

Completion occurs when you make the final payment to your lawyer, which is the Total purchase price minus the Deposit paid during the contract exchange. Your lawyer will then transfer the remaining payment to the seller's lawyer.

Once the funds are transferred to the seller's lawyer's account, the process is complete. Congratulations, you now own a property in London!

Paying stamp duty

Within 14 days of exchanging contracts and acquiring the property, you must pay a portion of the purchase price as Stamp Duty. The Stamp Duty Land Tax (SDLT) is required for property purchases over a certain amount in the UK, with an additional 2% surcharge for non-UK residents.

For SDLT purposes, a UK resident is someone who has spent 183 consecutive days in the UK during the year before the transaction. This can be proven with utility bills, bank statements, phone usage records, etc. The surcharge does not apply if you are leasing the property for seven years or less (starting from the day you receive the property), if you are a “crown employee,” if the property is a purpose-built student accommodation, or if the residential property is already subject to the circa 5% commercial property rates.

If there are multiple buyers and only one is a non-UK resident, all buyers are treated as non-UK residents and will pay the surcharge. However, if you are married or in a civil partnership and one person is a UK resident, both are considered UK residents for the transaction. Your solicitor will determine the SDLT amount and prepare your stamp duty land tax return.

Check out our stamp duty calculator to get a better idea.

One stop service

At Benham & Reeves, we provide a comprehensive one-stop service designed specifically for overseas property buyers in London. Our wide range of essential solutions ensures a smooth investment journey:

• Furniture and Refurbishment: Our sister company, InStyle Direct, offers furnishing and interior design solutions for both investment and self-use properties. From cost-effective designs to complete interior design solutions, InStyle Direct manages everything, including refurbishment services like painting, bathroom and kitchen upgrades, and full renovations.
• Letting services: We offer a complete range of letting services to ensure you find reliable tenants who are willing to pay competitive rents. With 21 branches across London, we can assist investors in any area where they wish to buy or rent properties.
• Rent management: Our lettings team ensures timely rent collection and immediate crediting to your account. We also handle maintenance issues and make sure tenants take good care of the property.
• Bill payments: We assist with timely payments of service charges, ground rent, and utility bills by making the payments on your behalf. This ensures that these essential expenses are managed without causing you any hassle.
• Tax return service: We help our non-resident clients prepare their tax returns as part of our services. Understanding the complexity, we ensure your taxes are completed accurately and on time.

(Average property price comparison between London and Hong Kong sourced from Numbeo, as on 15th July, 2024 / Hong Kong property ownership in the UK sourced from Land Registry data shared with Benham & Reeves in response to Freedom of Information response April 2023.)