Step-by-step guide to buying property in London
for Middle East homebuyers & investors

Arrange finances

If you're a Middle East resident planning to buy property in London, it's essential to carefully plan your finances and prepare for necessary fund transfers from your domestic bank account. Determine your budget for the purchase to streamline your property search.

Here are the different ways you can finance your London property from the Middle East:

• Cash purchase: Buying a property in London outright with cash eliminates borrowing challenges. Ensure sufficient funds for expenses like bank fees, taxes, legal fees, translator fees, furniture, insurance and ongoing maintenance. Cash purchase offers advantages like no interest repayment and potential bargaining power — especially if the property owners are motivated to sell quickly.
• Overseas mortgage from local bank: Some Middle East banks offer international banking services for arranging an overseas mortgage. You can confirm their support for London real estate investments. Opting for a lender in your home country provides several benefits, including savings on translation fees, a quicker credit check and higher approval chances based on credit score.
• Mortgage from a UK lender: Another option is to apply for a mortgage from a UK lender directly or through a UK bank or specialist broker. Opting for a UK lender can provide advantages such as a better understanding of local laws and the mortgage market, access to a broader range of mortgage deals and potentially more favourable interest rates.

Mortgage eligibility

Middle East investors have Sharia-compliant financing options that align with their religious and ethical requirements. Specific banks or institutions specialising in Sharia-compliant products may offer these options.

• Murabaha financing: The bank purchases and sells the property to the investor at a higher price. The investor pays in instalments, avoiding interest-based mortgages. This arrangement follows Islamic finance principles and ensures transaction transparency.
• Ijarah financing: The bank acquires and leases the property to the investor. Rental payments are made during the agreed lease period. Ultimately, the investor may have the option to purchase the property or extend the lease. This option is based on Islamic leasing contracts.
• Deposits, mortgage payments and mortgage brokers: Middle East lenders often require a deposit of 25% or more. A higher deposit can lead to lower mortgage rates. Mortgage brokers assist in exploring buy-to-let mortgages for foreign residents, offering favourable terms, flexibility, and interest-only options.

Documentation

Middle East investors buying property in the UK need to prepare the following documents with all buyers' names:

• Proof of identity: Current Passport (Valid UK visa not mandatory)
• Proof of address: Utility Bill, Driver's License, Bank/Building Society/Credit Union Statement or Tenancy Agreement (dated within the last three months)
• Proof of funds: 3-6 months bank statements from the account used for remitting funds
• Supporting documents for source of funds: Evidence of income from various sources including Salary, Business Income, Gifts, Fixed Deposits, Sale of Property, Investment Portfolio Liquidation, Company Profits, Dividend Payments, Inheritance, Insurance Policies, Retirement Income etc.

These documents must be certified by a currently practicing professional, such as:

• Licensed Conveyancer or Solicitor
• Chartered Accountant with a practicing certificate
• A qualified lawyer or Attorney
• Notary

Note: Ensure proper preparation, certification, and availability of all required documents during the property purchase process.

Narrow down your search

To simplify the property purchase process in London as a Middle East investor, consider the following:

• Purpose of purchase: Determine if the property is for personal use or investment.
• Size: Decide on the desired number of bedrooms and bathrooms.
• Location: Identify the specific area in London where you want to purchase the property.
• Property Type: Choose between older properties, off-plan purchases (with future completion), or recently completed properties in new developments.

Understanding leasehold: Many London properties are leasehold, where ownership is not compromised. Lease terms typically range from 125 to 999 years, and repair responsibilities are shared amongst the community for the building structure, roof and communal areas.

Know your budget

Once you have determined your budget and the amount you plan to remit from your Middle East bank account, it is vital to consider the various additional costs associated with the purchase. These typically include:

• Purchase price: The actual price paid for the property, including any discounts.
• Legal fees to the UK solicitor: Typically ranging from £1,800 to £4,000, handled by UK solicitors.
• Property maintenance charges:
  • Annual service charge: Estimated at £3-6 per square foot, payable to the developer for property maintenance.
  • Annual ground rent: Estimated at £200-600, also paid to the developer.
• Stamp Duty land tax (SDLT):
  For the Stamp Duty applicable to non-UK residents, please refer to our calculator https://www.benhams.com/calculator/stamp-duty/
• Miscellaneous disbursements: These can be anywhere between £500 to £700, covering various transaction charges paid to the solicitor or other parties. Examples include insurance fees, developer's solicitor engrossment fees, search or due-diligence fees and transaction handling charges.
• Mortgage lender's fees:
  Approximately 1% of the loan amount if financing is required.
• Furnishings (Optional):
  We offer an in-house furnishing service tailoured to your specific needs.

Viewing & shortlisting properties

When it comes to shortlisting properties, viewing them plays a crucial role. Our team can arrange viewings for you or your friends/family in London, who can do so on your behalf.

• Physical viewings: With 20 local offices covering most London areas, our experienced team can arrange in-person property tours for you. Once we know your travel dates, we will create an itinerary for guided tours of the shortlisted properties, giving you a first hand experience of the homes, amenities and their surroundings.
• Virtual viewings: We can discuss property details with you via Zoom or WhatsApp video calls. We provide personalised virtual tours, including sharing photos, videos, floor plans, apartment selections and even views from the apartments and the development.

Making an offer & reservation

Once you have selected the right property, our team will present an offer to the developer or seller on your behalf.

Here are some factors a Middle East investor has to consider:

• Resale or completed properties: Full payment is usually required to exchange contracts when purchasing a resale or completed property. However, the payment structure is designed to match the development's progress for under-construction properties, with payments made in stages.
• Under-construction or off-plan properties: To secure your preferred property, an initial reservation fee or token money is to be paid to the seller or developer. This fee ensures the property is reserved in your name. After the reservation, you usually have a fixed window to exchange contracts and pay 10% of the property's purchase price.

Instructing your solicitor

Property transactions in the UK require the involvement of a solicitor. Over the years, we’ve worked with several independent lawyers and can recommend to you solicitors or conveyancers who have extensive experience with such property transactions.

Once you reserve a property, your solicitor/conveyancer will handle all the required documentation and protect your interests throughout the purchase process.

To assist your solicitor, you'll need these documents:

• Proof of identity: Current passport (valid UK visa is not mandatory).
• Proof of address: A utility bill, driver's license, bank statement, building society statement, credit union statement or tenancy agreement (any one + dated within the last three months).
• Proof of funds: 3-6 months' worth of bank statements from the account that will be the source of funds for property acquisition.
• Supporting documents to verify the source of funds: documents that show the accumulation of funds over time, such as income from salary, business income, gifts, fixed deposits, sale of property, sales or liquidation of an investment portfolio, company profits, dividend payments, inheritance, insurance policies, retirement income and other relevant sources.

Acceptance of the offer

• Once the seller accepts your offer, you will proceed with paying the reservation fee and signing the reservation form.
• Following this, your solicitor will prepare documentation for the exchange of contracts.
• Exchange of contracts must be carried out within 28 days from the reservation date or as agreed upon reservation.
• As a buyer, ensure that the deposit amount is easily accessible for the exchange of contracts.
• Upon completing the property transaction, or as per an agreed-upon possession date for properties under construction, you must have the funds readily available to cover the total purchase amount, deducting the deposit amount.

Conveyancing

Conveyancing is when your lawyer or solicitor oversees property transactions in the UK. This process typically encompasses the following steps:

• The seller's solicitor provides your solicitor with a copy of the property's Title Deed, which contains the legal terms and conditions.
• Your solicitor or conveyancer is responsible for all the essential documentation while diligently protecting your interests. They act as your trusted representative and handle any inquiries or concerns.
• Solicitors can perform local searches, inquire about the furniture, fixtures and facilities and gather crucial information about the property and its surroundings.

Exchanging contracts

Up to this point, the buyer and seller's actions were not legally binding. However, once contracts are exchanged, both parties are legally obliged to follow the agreed terms.

• Contract exchange usually occurs within 28 days of the reservation date
• While exchanging contracts, the agreed deposit, usually 10% to 20%, is paid
• Payments are made according to prearranged and mutually agreed timelines for off-plan or under-construction properties.

Snagging or inspection of the properties

When purchasing off-plan properties, especially as a first-time buyer, it is crucial to conduct a thorough inspection before the property is handed over. This is commonly referred to as snagging or pre-inspection.

• Usually, a meeting is arranged with the developer for inspection, where a snag list is provided. This list includes a detailed inventory of items needing attention or rectification — covering everything from minor issues like paint splatters to more significant concerns such as faulty doors or leaks.
• At the inspection meeting, the developer will guide you through the features of your purchased property, including the central heating, hot water systems, lighting, switches, electrical consumer units and other relevant aspects. If any issues or deficiencies are discovered, you can bring them to the developer's attention for prompt resolution.

Completion of purchase

Completion is the final stage of the property purchase process, where you will make the last payment to your solicitor i.e.

Total Purchase Price – Deposit on exchange = Balance payment

Your solicitor will then transfer the remaining balance to the seller's solicitor's account. Congratulations! You are now the proud legal owner of a property in the UK!

Stamp Duty

On completion of your property purchase, it is crucial to pay Stamp Duty — a percentage based on the property's value. This payment is to be made within 14 days of contract exchange, where your solicitor will help calculate the exact amount of Stamp Duty and handle the stamp duty land tax return.

Click here for UK property and buy-to-let stamp duty tax calculator

One-stop Service

• Furnishing & refurbishment: Instyle Direct, a sister company of Benham & Reeves, specialises in cost-effective furnishing, interior design and refurbishment solutions for investment and self-use properties. Their expert team attracts tenants with attractive interior design solutions and manages everything from painting to complete renovations.
• Lettings: With 20 strategically located offices across London, we provide extensive coverage of sought-after areas for investors looking to buy and let properties. Our exceptional lettings services secure high-quality tenants at competitive rents.
• Management: B&R's dedicated team manages rent collection, ensuring prompt deposit into the investor's account. We also handle maintenance and ensure responsible tenant upkeep, providing you peace of mind.
• Bill payments: We handle service charges, ground rent, and utility bill payments for you, saving time and effort.
• Tax return service: We assist overseas clients with personal tax returns, ensuring compliance with international taxation complexities. Trust us to handle your tax obligations effectively and accurately.

Investing in London property offers Middle East investors a prime opportunity to capitalise on the city's prestigious real estate market and potentially secure long-term returns in a thriving global financial hub. With its international appeal and robust rental demand, London presents a compelling destination for those seeking a stable and lucrative investment.