Author Topic: Should I put my hard earned cash into a UK property?  (Read 968 times)

Albatross

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Should I put my hard earned cash into a UK property?
« on: August 06, 2019, 10:10:36 PM »
The place I live in is becoming politically unstable and I want to consider 'moving' my cash overseas.

Buying a UK property is one way to do it, or indeed buying index funds via the London Stock Exchange.

I have a British passport but currently living overseas and do not pay any UK taxes, but I suspect I will have to start paying tax on either the dividend income or rental income if I move my cash to the UK. Where I am currently at, there is no capital gains tax or tax on dividends.

Any thoughts?

daverobev

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Re: Should I put my hard earned cash into a UK property?
« Reply #1 on: August 07, 2019, 02:27:29 AM »
If you have a UK passport you're entitled to the tax free allowance in the UK. So if you earn under 12.5k GBP in rental income, no tax (though you will have to do self assessment).

I wouldn't, though, unless you can find somewhere with decent return. You talk about political instability, but have you looked at the UK since Brexit?

runbikerun

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Re: Should I put my hard earned cash into a UK property?
« Reply #2 on: August 07, 2019, 02:50:56 AM »
British property is a fabulously risky option at the moment. Five years ago, one US dollar was worth sixty pence; now it's worth eighty. The British property market is falling even before you look at that exchange rate, making it even riskier.

There's an argument to be made that you might be getting in at the bottom...but with Boris Johnson as prime minister and Jeremy Corbyn as leader of the opposition, the future doesn't exactly look bright.

Albatross

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Re: Should I put my hard earned cash into a UK property?
« Reply #3 on: August 07, 2019, 08:01:06 PM »
Haha thanks both - yes I have been following brexit (and like everyone else am tired of it) - and in some ways was thinking I would be getting in at the 'bottom'.

The pound has also devalued against the currency I hold (HK dollar) by a fair bit, because the HK dollar is pegged to the US dollar, so I'd also be making an arbitrage on the currency side as well.

I suppose my concern is more a tax issue and whether anyone would recommend I keep my assets in low tax places whilst accumulating wealth?

daverobev

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Re: Should I put my hard earned cash into a UK property?
« Reply #4 on: August 08, 2019, 01:39:25 AM »
Just buy a global stock ETF? You could find a non-HK broker and buy an Irish domiciled, LSE-listed one. Or a US one.

former player

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Re: Should I put my hard earned cash into a UK property?
« Reply #5 on: August 08, 2019, 02:37:22 AM »
Your retirement money should be in the currency of the country you are planning to retire to, given the high risk of currency movements going the wrong way in the run up to retirement or during retirement (eg. see the problems of UK pensioners in Spain). 

One way to put money into a currency is to buy property in that country.  Are you planning to retire to the UK?  If you are going to buy property in the UK you should know that stamp duty increases have made transaction costs pretty high now.  I would recommend only buying if it's a good rental that you are going to hang on to for a long time, and recognising that this is probably an uncertain time to buy a rental, given that it is about to become a lot more difficult to evict tenants and that the Labour party are talking about rent controls.  The other way to buy would be to buy the property that is going to be your long-term retirement home, but depending on how long it is until you retire you risk it not being a good rental in the meantime and effectively losing money as against other forms of investment.  So I would say only do that if you have you heart set on a particular property or kind of property that is available now and may not be available again in your lifetime, recognising that it is a heart purchase rather than a head purchase.





zoro

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Re: Should I put my hard earned cash into a UK property?
« Reply #6 on: August 08, 2019, 10:58:37 AM »
I have been surprised by the really poor returns (cap rates under 2%) that British people will tolerate when buying rental property.  I think it is because they havenít seen really steep declines in property prices yet. I would not touch the UK housing sector with a 50 ft pole. Only the Australian one seems worse.  Plus the government is actively discouraging buy to let with hostile tax policy like stamp duty etc.

cerat0n1a

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Re: Should I put my hard earned cash into a UK property?
« Reply #7 on: August 08, 2019, 05:11:58 PM »
Haha thanks both - yes I have been following brexit (and like everyone else am tired of it) - and in some ways was thinking I would be getting in at the 'bottom'.

There's 50% of the UK population think things that are going to turn out fine and the stables for their free unicorns are about to arrive. The moment of maximum pessimism has most certainly not been reached yet.

Far simpler to just find a non-HK broker and buy a global ETF, as daverobev suggested.

Albatross

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Re: Should I put my hard earned cash into a UK property?
« Reply #8 on: August 08, 2019, 07:52:16 PM »

Far simpler to just find a non-HK broker and buy a global ETF, as daverobev suggested.

Thanks - I thought about this too, but not sure where to start.

If I go for a non-HK broker, presumably that non-HK broker belongs to some jurisdiction - so are you saying for example, a UK broker and then buy a global ETF / a set of ETFs?

What brokers would you suggest, and in which country (if not the UK - which is presumably what you mean)?

former player

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Re: Should I put my hard earned cash into a UK property?
« Reply #9 on: August 08, 2019, 09:10:16 PM »

Far simpler to just find a non-HK broker and buy a global ETF, as daverobev suggested.

Thanks - I thought about this too, but not sure where to start.

If I go for a non-HK broker, presumably that non-HK broker belongs to some jurisdiction - so are you saying for example, a UK broker and then buy a global ETF / a set of ETFs?

What brokers would you suggest, and in which country (if not the UK - which is presumably what you mean)?
The first question is "what currency do I want to invest in", and the second question is "which is a country with a legal regime where the regulatory authorities will ensure that my money is not stolen or wilfully badly invested" and the third question is "which country will allow me to invest large sums on equal legal and financial terms with their nationals" and the fourth question is "what is the tax regime in that country".

Daverobev suggested Ireland or the USA, which would presumably be either Euros or dollars unless you find a specialist investor in other currencies, which will cost.  London should be able to meet all your financial investment needs whether in sterling or something else.

daverobev

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Re: Should I put my hard earned cash into a UK property?
« Reply #10 on: August 09, 2019, 12:26:33 AM »
Try Interactive Brokers, Schwab, Fidelity. You really do want a multinational organisation - IB are great.

Albatross

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Re: Should I put my hard earned cash into a UK property?
« Reply #11 on: August 09, 2019, 12:43:24 AM »

The first question is "what currency do I want to invest in", and the second question is "which is a country with a legal regime where the regulatory authorities will ensure that my money is not stolen or wilfully badly invested" and the third question is "which country will allow me to invest large sums on equal legal and financial terms with their nationals" and the fourth question is "what is the tax regime in that country".


Thanks. As you say, UK should be able to fulfil one's investment needs, even if GBP is dropping at the moment (or that might be a good thing). Having done the calculations and taking into account the personal tax allowance, I believe I wouldn't be paying an awful lot of tax on UK dividend income since I'd be in the lower bracket (no other job / income in the UK).

Albatross

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Re: Should I put my hard earned cash into a UK property?
« Reply #12 on: August 09, 2019, 12:48:33 AM »
Try Interactive Brokers, Schwab, Fidelity. You really do want a multinational organisation - IB are great.

Thanks daverobev - IB is probably sacrosanct on these forums, but I've honestly had some concerns about the fact that they lend money on margin and would be concerned they'd go under without a physical presence. Are my fears unfounded?

I know retail / high street banks charge you an arm and a leg for their equity trades etc, but in some strange way I'd trust them over IB since they have a clear physical presence. Not sure how one would do a 'bank run' on IB, or how (if at all) my investments would be protected in the event IB went under. My understanding is that IB has entirely separate accounts for its equity investments and so even if IB went under they would not be able to settle with creditors using people's investments. The fear remains though, so am happy to be told otherwise.

daverobev

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Re: Should I put my hard earned cash into a UK property?
« Reply #13 on: August 09, 2019, 01:52:04 AM »
Try Interactive Brokers, Schwab, Fidelity. You really do want a multinational organisation - IB are great.

Thanks daverobev - IB is probably sacrosanct on these forums, but I've honestly had some concerns about the fact that they lend money on margin and would be concerned they'd go under without a physical presence. Are my fears unfounded?

I know retail / high street banks charge you an arm and a leg for their equity trades etc, but in some strange way I'd trust them over IB since they have a clear physical presence. Not sure how one would do a 'bank run' on IB, or how (if at all) my investments would be protected in the event IB went under. My understanding is that IB has entirely separate accounts for its equity investments and so even if IB went under they would not be able to settle with creditors using people's investments. The fear remains though, so am happy to be told otherwise.

Your investments are held in a ring-fenced account (along with all other clients).

They did lose money when Switzerland decoupled their Franc from the Euro (as leveraged traders were wiped out), but... they're big enough that it should be fine.

Your investments are generally protected to a certain amount, too, I believe - depending on the domicile of the account, it is a government thing. A large, publicly listed company should be ok in any case.

cerat0n1a

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Re: Should I put my hard earned cash into a UK property?
« Reply #14 on: August 09, 2019, 03:08:11 AM »
I don't think choice of currency matters very much if you're investing in a global tracker. The underlying value is the same.

Be aware that foreign dividend income is treated differently to dividend income from UK companies in UK taxation, although it won't matter until you get over the £12.5k per year figure. Presumably you can start to shelter some of it in ISAs etc anyway (probably worth it to avoid having to fill out forms/ do capital gains calculations, even if you don't actually pay tax, IMO.)

former player

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Re: Should I put my hard earned cash into a UK property?
« Reply #15 on: August 09, 2019, 04:03:33 AM »
ISAs are only available to UK residents -

https://www.gov.uk/individual-savings-accounts

runbikerun

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Re: Should I put my hard earned cash into a UK property?
« Reply #16 on: August 09, 2019, 06:29:58 AM »
They did lose money when Switzerland decoupled their Franc from the Euro (as leveraged traders were wiped out), but... they're big enough that it should be fine.

Talking to foreign exchange professionals about that decoupling is a sobering experience. I wasn't even in FX at the time, but had a couple of clients who'd moved their borrowings into Swiss francs to avail of a lower interest rate. In twenty minutes, their borrowings went from being about 200k in euro to almost 270k.

Don't ever underestimate the potential of currency risk to utterly annihilate your plans.

A Fella from Stella

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Re: Should I put my hard earned cash into a UK property?
« Reply #17 on: August 09, 2019, 10:39:44 AM »
If you want to live there, yes.