Things to know when buying UK property

21 March 2023

Please note: The following article is written with England and Wales in mind. The rules of property buying in Scotland are slightly different.

If you’re an international buyer interested in UK property, it can sometimes be hard to know where to start.

While there are no legal restrictions on foreigners buying property in the UK, there are still many hurdles to negotiate before you can seal the deal. Below you’ll find some useful insights on the key issues and what to expect during the property-buying process, as well as the potential pitfalls you might encounter.

1. Estate agent vs. buying agent – who to use?

Once you’ve worked out budgets and researched chosen areas, it’s time to start looking for properties. In addition to a number of property websites, the first port of call is usually an estate agent, who can show you around available properties for sale. Alternatively, you could use a buying agent, who will work on your behalf to find the right property for you and negotiate on price.

In the UK, it’s standard practice for sellers to hire estate agents – who will market their properties and facilitate the sale, acting as the go-between for any buyers and the property owner in the transaction process.

There is, however, one fundamental difference between buying agents and estate agents, says Jeremy McGivern, Founder of Mercury Homesearch, a central London buying agent.

“The estate agent is paid by the seller and is legally obliged to achieve the highest price or best terms possible – conversely, the buying agent is paid by the buyer,” he says. “Buying agents are also there to protect a buyer’s best interests and give access to the entire market. And they’re able to source off-market properties, give objective advice on valuations and negotiate the lowest price and best terms possible.”

Yet both have important, and complementary, roles to play in the home-buying process.

“People often use buying agents if they’re based abroad and struggling to get over to the UK for viewings, or don’t have huge knowledge of the areas they want to buy in,” says Richard Gutteridge, Co-Head of Prime Central London at estate agent Savills.

“Buying agents will hold your hand through the whole process. But equally, an estate agent also plays a key role for the buyer. They can steer you through and manage some of the expectations of the seller.”

Camilla Dell, Founder of central London buying agency, Black Brick, goes further: “Clients of buying agents are often seen by estate agents as more committed – they’ve already paid an up-front registration fee and gone through ‘know-your-customer’ procedures – most buyers do not do that unless they are serious about buying.”

2. The bidding process

Most UK properties are listed for sale by estate agents who quote an asking price. If you want to bid for a property, this is the time to negotiate on price – it’s not uncommon for people to offer below the asking price on a first bid.

“When making a bid, you need to have a good understanding of the value of a property – and what would be a sensible price to pay,” says Dell at Black Brick. “That’s hard to do without a buying agent advising you. We collate comparable sales data and carry out due diligence on the seller before making offers. When negotiations fail, it’s usually because people assume properties should sell for a certain percentage below an asking price.

“But there’s no rule of thumb, and every deal is different. It’s also worth noting that estate agents will soon get bored dealing with people who just bid far below an asking price.”

Bids can also fail because buyers focus on the wrong thing.

“One of the biggest mistakes buyers can make is they fixate on price per square foot comparisons,” says McGivern at Mercury Homesearch. “While it can be a useful way to get a general value, you shouldn’t rely on it to determine the true value of a property – as it’s such a blunt instrument.

“House price negotiation can be tricky at the best of times – especially knowing you could lose out on your ideal property. But there are far more important factors that you need to consider when negotiating otherwise you will not achieve the lowest price or best terms possible.”

There is no best way to make a bid, but buyers should be decisive and be prepared to act quickly if they see a property that they like.

“Before you even start looking for properties, you need to make sure you’re in a position to move swiftly – otherwise you risk missing out on opportunities,” says Stephen Moroukian, Head of Product and Proposition for Real Estate Financing at Barclays Private Bank.

“That means speaking to your tax advisers, instructing solicitors and certainly having spoken to your financiers – whether you are a cash buyer, or looking to arrange leverage.”

A seller can also legally pull out of any deal right up until ‘exchange of contracts’ (the moment a sale becomes legally binding), even after building surveys have been paid for by the buyer and completion dates agreed.

“It’s totally down to the discretion of the seller if the buyer is taking too long, or if they want to ‘change horse’ and accept a higher new bid,” says Gutteridge at Savills. “And while changing buyer so late in the process – or gazumping – is not the estate agent’s choice, if a seller is presented with an enormously higher offer, it’s their prerogative whether they accept it or not. I call it their house rules.”

3. Tax considerations

The key tax to consider when buying UK property is the stamp duty land tax (SDLT), which is paid on purchase in England and Northern Ireland. Scotland and Wales have their own systems, but they work in broadly similar ways.

No stamp duty is due on the first £250,000 of a property providing it’s your main residence (although the threshold is £425,000 for first-time buyers)1. The SDLT is also a progressive tax so the more expensive the property, the more stamp duty you’ll need to pay. For example, on a £5 million property you would attract stamp duty of just over £500,000 on your main residence. You will also need to pay higher rates of SDLT on buy-to-let and second home purchases.

Council tax is also collected by local authorities for the period you own the property. While you could also be liable to pay capital gains tax on the profits made on its eventual sale, especially if it’s a second home or you’re a non-UK resident. And there’s also inheritance tax to consider if the owner of a property dies whilst owning it.

While this is far from a definitive list, it’s certainly a complex situation – with differing laws applied to permanent UK residents, those with ‘non-dom’ status or people who are classified for tax purposes as non-resident individuals.

4. Leasehold vs. freehold

Leasehold and freehold are the two main ways of owning a property in the UK. Freeholds are typically associated with houses, while leaseholds are for flats.

When you buy freehold, you own both the property and the land it sits on. You’re responsible for maintenance and can make alterations to the property, subject to any planning permissions required.

With leasehold, you own a lease – and are responsible for everything within the four walls of your flat – but you’re unlikely to be allowed to make any structural changes without the consent of the landlord, also known as the freeholder. Leaseholders are usually required to pay an annual service charge for things like maintenance and upkeep of the property, in particular the communal areas.

A lease is normally for a period of 99 or 125 years, when first granted. But as the years go by, leases reduce in length and value – anything below 80 years is considered a short lease and can be more difficult to get a mortgage on. That’s why leasehold properties – especially ones with shorter leases – are usually cheaper to buy because of the risks involved. It is, however, possible to extend a lease for a fee.

“A lot of international buyers are instantly put off by the idea of leasehold, which seems at first like glorified rent and which can dramatically narrow their choice of properties unnecessarily,” says McGivern at Mercury Homesearch.

Dell at Black Brick agrees: “As a buyer, you shouldn’t be scared about buying a leasehold property, especially if you’re buying in London as you’ll be missing out on huge swathes of the market. We spend time educating our clients on how leases work – that they are robust, and they do protect tenants, and you have a legal right to extend your lease after two years of ownership.”

5. Planning permissions and building surveys

Many people buy properties with plans to renovate and develop them. But it’s prudent to work out what you can and can’t do before putting in an offer.

While most internal works and some basic house extensions are allowed without planning permission (they are classed as permitted developments), there are however far stricter rules governing flats, as well as homes in conservation areas and listed buildings. For instance, you may even need consent just to fit a new kitchen in a listed building.

“All properties can be renovated, but not necessarily in the way that you want,” says McGivern at Mercury Homesearch. “Planning permission is never certain, so you should always check with building specialists, architects or even the local authority before you put a bid in to get a sense of whether it’s likely to be granted or denied.

“But the strict laws shouldn’t dissuade you from buying listed buildings or in conservation areas. You just need specialist advice to ensure what you want to do is possible. Because if you do alter something you’re not allowed to, you’ll only get yourself into trouble down the line – and you’ll struggle to sell that property unless you put things back to how they were.”

When it comes to surveys, there’s no legal requirement to have a survey on a property you want to buy. But most buyers take one out, opting for the more detailed inspections, especially on higher-value properties – to get a full health check on what could be your most expensive asset.

Surveys can flag up hidden issues, bringing you peace of mind knowing there are no hidden surprises. Negative findings can also be used to negotiate on price.

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