September 2018

FIBA Advantage

Ensuring UK property remains a popular investment destination for foreign nationals

Paresh Raja, CEO of Market Financial Solutions

The UK’s specialist finance industry has grown at an impressive rate over the past decade, offering investors and businesses quick access to the capital needed to pursue property investment opportunities. Indeed, research from Market Financial Solutions recently revealed that one in five UK homebuyers from the past decade used some form of alternative finance to complete on a real estate purchase.

Specialist finance has become increasingly popular for property buyers stuck in complex situations. This can range from adverse credit ratings to divorce settlements and annulments of bankruptcy. In these scenarios, the stringent lending measures imposed by mainstream banks can often mean that loans are either delayed or refused. On the other hand, bridging loans are typically faster, more flexible and tailored to the needs of the individual borrower.

Of all the complicated scenarios borrowers typically find themselves in, there is one group of people who regularly struggle to acquire loans from the UK’s traditional lenders – foreign nationals. Due to the rigid tick-box approach often employed by banks, foreign nationals need to satisfy an extensive list of requirements, which can often result in a protracted and delayed application progress. A sizeable deposit is also commonly demanded upfront.

Supporting foreign nationals in need of capital

The UK may be amidst a period of uncertainty as the country prepares for Brexit in March, but this has so far failed to deter general investor appetite for property. Average house prices have been steadily rising over the past decade, and foreign investors still favour the investment opportunities on offer – according to a recent report, 75% of investors based in the Middle East’s Gulf Cooperation Council (GCC) consider the UK one of the world’s leading destinations for property investment.

Importantly, foreign nationals with sizeable assets can use specialist finance products such as bridging loans to complete on prospective property acquisitions. A bridging loan can be issued with an overseas asset used as a form of security, thereby allowing foreign nationals to quickly take advantage of a property investment opportunity.

The Bank of England’s recent decision to raise interest rates, combined with Brexit, could make it even more difficult for foreign nationals to apply for a mortgage in the coming months. Nonetheless, foreign nationals do not need to feel unnecessarily disadvantaged, particularly when it comes to HNW individuals who have an international investment portfolio. Increasing in popularity for more than a decade now, bridging loans have proven to be an important instrument in stimulating investment in the real estate market while at the same time supporting foreign nationals living in the UK.

With Brexit on the horizon, government and industry bodies must be proactive in their efforts to encourage investment into the country. This is particularly true when it comes to commercial and residential real estate, which represent major contributors to GDP. Thankfully, the diverse range of specialist finance solutions on offer in the UK means that foreign nationals have various means to access the capital they need.