Buying guide for Malaysian investors looking
to invest in UK property

High rental demand

London's population exceeds nine million and is on an upward trend, continuing to draw professionals and students from around the globe. This influx significantly pressures the capital's housing market, increasing rental demand and prices. According to the latest studies, the average rent in London for 2024 is £2,121 (approximately RM 12,000), nearly double the UK national average of £1,220. At Benham & Reeves, each listed rental unit with us attracts a minimum of 15 inquiries. With 21 offices throughout London and a specialised China and Japan Desk, we onboard high-calibre professional tenants willing to pay premium rates.

Strong capital growth

Data from the Nationwide Building Society showcases that property prices in London and the UK have experienced substantial growth over the past decade, with the national average increasing by nearly 54%. Certain areas in London, such as Waltham Forest and Newham, have seen property values rise by over 100% in this same timeframe. Improvements in transport infrastructure and multiple regeneration programmes, alongside macroeconomic factors such as interest rate reductions and lower inflation, have spurred increased activity in London's real estate market.

Diversification and security

As a Malaysian investor, purchasing property abroad facilitates portfolio diversification by mitigating risks associated with domestic investments while tapping into a stable market with guaranteed returns. The United Kingdom is recognised as a secure investment location with a transparent legal framework bolstered by comprehensive regulations that safeguard the rights and interests of domestic and overseas property buyers.

While there are numerous advantages to investing in London real estate, the purchasing process can be complex for some without the right guidance. For instance, all property transactions in the UK require a UK-based solicitor and conveyancer. With over 65 years of experience, Benham & Reeves has a proven track record in helping international investors secure premier properties in London.

Beyond our 21 London branches, we also have a knowledgeable team in Kuala Lumpur ready to assist you in finding and acquiring your ideal overseas property.

For further guidance, we have developed a straightforward step-by-step guide outlining the entire property-purchase process in the UK for a Malaysian investor.

Planning your finances

Setting a budget and arranging finances before proceeding is essential before purchasing a property outright with cash or securing financing through a UK or Malaysian bank. Malaysian buyers can qualify for UK mortgage loans, but weighing the advantages and disadvantages of various financing options is essential. You will also need to decide whether to invest in a ready-to-move property (ideal for immediate occupancy or rental income) or opt for an off-plan project that allows staged, flexible payments to the developer.

Clarifying the purpose of your purchase is also important, as mortgage terms vary depending on your goals. For instance, buy-to-let mortgages often require a higher deposit and are typically interest-only loans, with terms based on the property's rental potential. On the other hand, residential mortgages might require a smaller upfront deposit but tend to be more expensive in the long run. If you're buying with cash, you must also provide evidence of your funds' source — a legal requirement in the UK.

Mortgage eligibility

Your eligibility will depend on the reason for buying the property to get a mortgage in the UK. Lenders typically evaluate your capacity to repay the loan with interest by the end of the term. Payment terms are usually determined based on the risk level, including the loan-to-value (LTV) ratio, annual income, and payment approach based on rental income or salary. While many property developers in London accept deposits ranging from 10-15%, it's suggested that buyers consider making a larger deposit, as this reduces the lender's risk and speeds up the entire mortgage process.

For individuals with regular incomes, a guideline of 4.5 times their annual salary is optimum when applying for a mortgage to avoid overextending monthly payments. Working with a reputable mortgage broker in the UK can make this process more manageable.

Paperwork

As a Malaysian buyer purchasing property in the UK, you'll need to provide the following documents to initiate the buying process

• Proof of identity
  A valid passport is required. You do not need a UK visa to purchase property.
• Proof of address
  It can be utility bills, bank statements or a driving license — all of which must be dated within three to six months.
• Proof of funds
  Due to strict UK anti-money laundering regulations, you must demonstrate that you have the necessary funds, along with evidence of source. Bank statements from the past three to six months can verify the available funds. Still, you will need supporting documents, such as payslips, business income records, tax returns or proof of inheritance or property sales, to confirm the source.
• Certification of documents
  A UK-based solicitor, accountant or authorised notary must certify all provided documents.

Narrowing down your search

Whether you're eyeing a modern studio in Zone 1 or a spacious Victorian house in the outer boroughs, there's a wide range of property options across London. However, to avoid feeling overwhelmed by the choices, consider the following factors before you begin your search

Purpose of buying
Determine whether you're purchasing for personal use or as a buy-to-let investment. This decision will help your agent negotiate the best terms for your deal.

Location choice
London has 32 boroughs, each with diverse neighbourhoods and property types to match various preferences and budgets. For those interested in prime Zone 1 locations, areas including Knightsbridge, Mayfair, Belgravia, Kensington and Chelsea are highly desirable. Shoreditch is a trendy spot for young millennials, while professionals in finance and tech often prefer Canary Wharf and the City. Zones 1 and 2 landlords typically command the highest rents, though London's extensive transport network ensures solid rental demand throughout the city.

Property size
Having a rough idea of the property size you need is essential. You can choose from studios and one or two-bedroom apartments to larger units and penthouses. However, based on our letting experience, one and two-bedroom apartments tend to command the highest rental demand and yield.

Property ownership
In the UK, property ownership is similar to Malaysia, with three main types of titles

• Freehold
• Share of freehold
• Leasehold

It's ideal to understand which title suits your investment needs. You may also need to decide if you're more interested in a new-build, off-plan or resale property, as this decision can affect amenities, payment plans and other factors.

Know your budget

When purchasing a property in London, you must account for additional costs beyond the purchase price. Here's a quick breakdown of the expenses to include within the budget

Legal fees
Hiring a UK solicitor to handle conveyancing and contract drafting is mandatory. Legal fees generally range from £1,800 to £4,000.

Mortgage fees
If you secure a mortgage, expect to pay service charges for loan processing and any extra valuations required by the lender.

Stamp duty land tax (SDLT)
Non-UK residents are subject to the following SDLT rates based on the property's 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
Leasehold properties often have annual ground rent and service fees, which typically range from £200 to £600, depending on the size and services of the property.

Miscellaneous costs
Set aside approximately £500 to £700 for miscellaneous expenses, including transaction fees, insurance and legal paperwork.

Furnishings
Although optional, it's advisable to budget for furnishing costs, especially if you plan to rent or use the property for personal use.

Remember that these are estimated costs and the actual figures may vary.

Viewing & shortlisting properties

Viewing the property is important before investing. With 21 branches across London and a dedicated team in Malaysia, we can arrange physical or virtual viewings of shortlisted properties for you and your family.

• Physical viewings
  Our property experts can organise in-person property tours. Once we know your travel dates, we will prepare a customised itinerary for guided tours of the properties you've shortlisted. These visits allow investors to explore the amenities and get a firsthand feel for the surrounding area.
• Virtual viewings
  If an in-person visit isn't possible, we can assist with virtual tours via Zoom or video calls on WhatsApp. Our personalised virtual tours provide a detailed look at the property through photos, videos, floor plans, apartments and views of the apartments and the building itself.

Sending an offer & reservation

Once you've shortlisted the property you'd like to purchase, we will submit your offer to the developer or seller and guide you through the subsequent steps. The deposit and payment structure will vary depending on the type of property you're buying

• Existing or ready properties
  You may be required to pay the total amount upon submitting your offer and signing the contract for pre-owned or fully completed properties.
• Off-plan or under-construction properties
  If the property is still in the planning or construction phase, you can reserve your choice of unit by paying a small upfront fee, often a token amount. This fee holds the property in your name and the remaining 10% is typically due upon exchanging contracts, which usually takes place within 28 days. For off-plan properties, payments generally are staged according to construction milestones — offering greater flexibility.

Instructing your solicitor

Property transactions in London require the expertise of a UK-based solicitor and we can connect you with some of the top solicitors and conveyancers in this country. Once you've secured a property, your solicitor will handle all necessary legal documentation to safeguard your rights through the purchasing process.

The key documents your solicitor will need include

• Proof of identity
  A valid passport (a UK visa is not required to buy property)
• Proof of address
  This can be a utility bill, driver's license, bank statement, credit union statement, building society statement or tenancy agreement dated within the last three months.
• Proof of funds
  You'll need to provide three to six months of bank statements from the account you'll use to purchase the property.
• Supporting documents
  Additional documentation to confirm the source of your funds, such as proof of income from employment, business revenue, gift deeds, savings, inheritance, property sales or investments.

Acceptance of the Offer

Once your offer is accepted, you must pay the reservation fee and sign the necessary documents for your solicitor to start drafting the contract. To facilitate a smooth process, keep the following points in mind

• Stick to timelines
  The contract exchange typically occurs within 28 days, although the exact timeline may vary based on your agreement.
• Arrange the deposit in advance
  Ensure the deposit amount is readily available and accessible when signing the contract.
• Final payment
  Be prepared to pay the remaining balance (after the deposit) upon completing the property transaction or on the agreed possession date for off-plan properties.

Conveyancing

Once your offer is accepted, your appointed solicitor will handle the legal aspects of the buying process, also known as conveyancing. This process involves these key steps

• Checking all the terms
  Your solicitor will review the legal terms and conditions of the property as outlined in the title deed provided by the seller's solicitor.
• Transfer documentation
  To transfer property ownership, you must draft a legally binding agreement based on your required ownership structure. Your solicitor will offer legal advice to ensure favourable terms for your purchase.
• Local searches
  Buyers need to determine if there are any outstanding fines or liabilities associated with the property before completing the purchase. Your solicitor will conduct these local searches to uncover crucial information about the property and its surrounding area.

Exchanging contracts

Before the official exchange of contracts, neither the buyer nor the seller has any legal obligations. However, once contracts are exchanged, all terms and conditions of the agreement become legally enforceable and must be honoured.

Several key points should be considered during this process. Contracts are typically exchanged in the presence of the solicitors representing both the buyer and the seller within 28 days of the property reservation.

The seller will expect a deposit to be paid upon exchanging contracts, which usually ranges from 10% to 20% of the purchase price. In the case of off-plan property sales, payments are typically staged and linked to construction milestones of the development.

Property inspection (snagging)

It's always wise to thoroughly inspect a new property before taking legal possession. This process, commonly called snagging or property inspection, helps identify any defects or shortcomings in the property. Here's how a snagging process unfolds

The seller or property developer will arrange a meeting after you've reviewed the property and provided a list of any concerns or items you would like addressed. You can raise issues ranging from internal leakages and paint stains to needing new door knobs, allowing you to request necessary improvements.

In addition to addressing your concerns, the developer will need to demonstrate the various features of the new apartment or house, including any appliances and electrical systems. Before handing over the keys, the developer will provide all essential information, from central heating to plumbing and lighting fixtures.

Completion of purchase

Completion is when you make the final payment to your solicitor, which covers the total purchase price minus the deposit you paid during the contract exchange. Your solicitor will then transfer the remaining funds to the seller's solicitor. Once the funds have been successfully transferred, your property buying process in London is complete. Congratulations, you are now the proud owner of a property in London!

Stamp duty payment

Within two weeks of completing your property purchase, you must pay HMRC the applicable Stamp Duty Land Tax (SDLT). This tax is a percentage of the property's value and applies to purchases above a certain threshold in the UK, with an additional 2% surcharge for non-UK residents.

To qualify as a UK resident for SDLT purposes, you must have spent at least 183 consecutive days in the UK during the previous tax year. You can prove your residency by submitting utility bills, bank statements or phone usage records. Notably, the surcharge does not apply if you lease the property for seven years or less from the date you take possession.

In situations where multiple buyers are involved if at least one is a non-UK resident, all buyers will be classified as non-UK residents and subject to the surcharge. Conversely, if you are married or in a civil partnership and one partner qualifies as a UK resident, both partners will be considered UK residents for the transaction. Your solicitor will calculate the SDLT amount and prepare your Stamp Duty Land Tax return.

You can also use our stamp duty calculator to determine your SDLT liability.

One-stop service

At Benham & Reeves, we offer a comprehensive service package tailored specifically for Malaysian and overseas property buyers, ensuring a smooth and hassle-free experience in London.

Our wide range of services includes

• Furnishing & refurbishment
  Through our sister company, InStyle Direct, we offer furnishing and interior design services tailored to investment and personal properties. Whether you require cost-effective designs or complete interior design solutions, we can handle everything, including refurbishment tasks such as painting, kitchen and bathroom upgrades and full-scale renovations.
• Lettings services
  Our complete letting services are designed to help you find reliable tenants who offer competitive rent. With 21 branches across London, we can assist investors in any area where they wish to buy or rent properties.
• Rent management
  Our agents ensure timely rent collection by directly crediting your bank account. We also handle all maintenance issues and advise tenants to maintain the property to a high standard.
• Bill payments
  We pay service charges, ground rent and utility bills on your behalf, ensuring that these essential expenses are managed without any hassle.
• Tax return assistance
  We support our non-resident clients by helping them prepare their tax returns, ensuring accuracy and compliance with complex tax regulations.