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

Arranging your finances

Whether you buy a property with direct cash or secure financing from a UK or Malaysian bank, setting a budget and arranging the required finances is crucial before planning a purchase. While Malaysian buyers can qualify for a UK mortgage loan, you need to understand the pros and cons of different financing types. Firstly, you need to decide if you want to buy a ready property (for immediate move-in or rental income) or an off-plan scheme where you get the flexibility to make staged payments to the developer.

Be clear on your purpose of purchase, as the mortgage terms would differ accordingly. For example, buy-to-let mortgages may require the buyer to pay a higher deposit for their interest-only loans, calculated based on the rental potential of the asset. On the other hand, residential mortgages are more expensive in the long term, although you may have to pay a smaller deposit upfront. For cash buyers with liquidity, establishing the source of funds is mandatory in the UK.

Mortgage eligibility

As stated above, your mortgage eligibility in the UK will differ based on the purpose of the property purchase. Typically, lenders need to assess your ability to pay the amount back with interest at the end of the term. Payment terms are generally negotiated based on the risk involved, including the loan-to-value (LTV) ratio, annual income and payment strategy (through rental income or salary).

While many developers in London accept deposits between 10-15%, we encourage buyers to opt for paying a bigger deposit, as it decreases lender risk and expedites the overall mortgage process. Additionally, for salaried individuals we advise considering a benchmark of 4.5 times their annual salary when seeking a mortgage as you do not want your entire salary consumed in monthly instalments. Working with a reputable mortgage broker in the UK can help you navigate this process smoothly.

Documentation

As a Malaysian property buyer in the UK, you will need the following documents to get started with the buying process

• Proof of identity
  All you need is a valid passport. You don't need a UK Visa to buy property in the country.
• Proof of address
  You can submit documents such as utility bills, bank statements or even your driving license. However, all documents need to be dated within the past three to six months.
• Proof of funds
  Showing you have the required funds and the source is mandatory in the UK, as the country has strict laws to counter money laundering. While bank statements from the past three to six months can verify the status of funds, you will need additional documents, such as payslips, business revenue sheets, tax return certificates, sale of property or inheritance proof, etc, to disclose the correct source.
• Certification of documents
  All documents provided need to be certified by a UK-based solicitor, accountant or authorised notary.

Narrow down your search

Whether it is a stylish studio in Zone 1 or a large Victorian house in the outer Boroughs, we have all types and sizes of properties across the city available with us. However, as a buyer, to avoid getting overwhelmed with the options, try considering a few things before you start looking at properties.

• Purpose of buying
  You could buy the property for self-use or as a buy-to-let investment. Knowing and sharing the purpose of buying can help your agent negotiate the best terms for your deal.
• Location choice
  In London, we have 32 Boroughs or local councils with a diverse range of neighbourhoods and property types to suit varying budgets. If you are looking for a prime Zone 1 location, areas like Knightsbridge, Mayfair, Belgravia, Kensington and Chelsea are highly sought-after. For young millennials, Shoreditch serves as a trendy neighbourhood, while professionals in the finance and tech districts prefer Canary Wharf and the City. Landlords in Zone 1 and 2 may enjoy the highest rents, but thanks to London's excellent transport network, there is no shortage of rental demand anywhere in the city.
• Property size
  It's good to have an estimate of the property size you need, as developers can offer you studios, Manhattans, one, two and three-bedroom apartments and even penthouses. In our lettings experience, one and two-bedroom units have the highest rental demand and return potential.
• Property ownership
  Property ownership rules in the UK are similar to Malaysia's, where you have three types of property titles - freehold, share of freehold and leasehold. It's good to understand the different types of UK property titles and what suits your needs the best. Additionally, the type of property, whether a new-build, off-plan or a resale unit, should also be considered before you select a property, as the amenities and payment plans could differ.

Know your budget

Buying a London property involves additional expenses, exceeding the purchase price. Here’s an overview of the payments you will need to budget for

Legal fees
The expertise of a UK solicitor is mandatory for managing legal matters like conveyancing and drafting contracts. Legal fees typically range from £1,800 to £4,000.

Mortgage fees
If you plan on applying for a mortgage, you may need to pay service charges for loan processing and additional valuations requested by the lender.

Stamp Duty Land Tax (SDLT) For non-UK residents, the following SDLT rates apply based on property 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 come with annual ground rent and service charges, typically ranging from £200 to £600, depending on the property size and services offered.

Miscellaneous Costs
Allocate around £500 to £700 for additional expenses such as transaction fees, insurance, and legal paperwork.

Furnishings
While optional, it’s wise to account for furnishing costs, especially if you plan to rent out the property or use it for personal purposes.
Keep in mind that these are estimates, and actual costs may vary.

Viewing & shortlisting properties

To make a well-informed decision about which property to purchase and where, it’s essential to experience the property firsthand before making an investment. With 21 branches across London and a dedicated team in Malaysia, we can arrange for either a physical or virtual viewing of shortlisted properties for you and your family members.

• Physical viewings
  Our local property experts, located throughout London, can coordinate in-person property tours for you. Once we have your travel dates, we’ll create a tailored itinerary for guided tours of your shortlisted properties. These viewings provide you with a firsthand experience, allowing you to explore the amenities and assess the surrounding areas.
• Virtual viewings
  If you can't attend in person, we can organise virtual property tours via Zoom or WhatsApp video calls. Our customised virtual tours include sharing photos, videos, floor plans, apartment options, and views from both the apartments and the building.

Sending an offer & reservation

Once you have selected the property you want to buy, we will communicate your offer to the developer or seller and guide you through the remaining steps. Your deposit and subsequent payments will depend entirely on the type of property you are buying.

• Existing or ready properties
  When buying a pre-owned or fully completed property, you may need to pay the entire amount upon submitting the offer and signing the contract.
• Off-plan or under-construction properties
  If the property is still in the planning or construction phase, you can secure your chosen unit by paying a small upfront fee, known as a token amount. This payment reserves the property in your name, with the remaining 10% typically due at the exchange of contracts, which usually occurs within 28 days. For off-plan properties, you have the flexibility of making staged payments linked to the construction milestones of the scheme.

Instructing your solicitor

Property transactions in London mandate the services of a UK-based solicitor, and we can arrange that for you as we work with some of the best solicitors and conveyancers in the country. Once you've secured the property, your appointed solicitor will manage all the necessary paperwork to protect your rights throughout the purchase process.

The documents your solicitor will require include

• Proof of identity
  A current passport (a valid UK visa is not compulsory).
• Proof of address
  Acceptable documents include utility bills, a driver’s license, bank statements, building society statements, credit union statements, or a tenancy agreement, dated within the last three months.
• Proof of funds
  Provide 3-6 months of bank statements from the account you’ll use to purchase the property.
• Supporting documents
  Additional documentation to verify the source of funds, such as proof of income from employment, business, gift deeds, savings, inheritance, property sales, investment sales, or other income sources.

Acceptance of the offer

After your offer is accepted, you need to pay the reservation fee and sign the required documents for your solicitor to begin drafting the contract. To ensure a smooth process

• Stick to timelines
  The contract exchange usually takes place within 28 days, though the exact timing may vary depending on the agreement.
• Arrange the deposit in advance
  Ensure the deposit amount is readily available and accessible at the time of signing the contract.
• Final payment
  Be prepared to pay the remaining balance (after the deposit) upon completion of the property transaction or on the agreed possession date for off-plan properties.

Conveyancing

After the offer is accepted, your instructed solicitor will manage the legal aspects of the buying process, also known as conveyancing. This process includes the following steps

• Checking all the terms
  Your solicitor reviews all the legal terms and conditions of the property outlined in the title deed provided by the seller's solicitor.
• Transfer documentation
  The transfer of property ownership requires drafting a legally binding agreement depending on the structure of ownership you need. Your solicitor will provide legal counsel to help you with the terms most favourable for your purchase.
• Local searches
  Buyers need to find out from local councils if there are any outstanding fines or liabilities on the property before acquiring it legally. Your solicitor's expertise helps with these searches to reveal important information about the property and its neighbourhood.

Exchanging contracts

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

Some key points to remember when exchanging contracts

• Transfer timeline
  Contracts are typically exchanged in the presence of the solicitors of the buyer and seller within 28 days of property reservation.
• Deposit payment
  The seller will expect a deposit to be paid upon exchange of contracts, usually between 10% to 20% of the purchase price.
• Off-plan payments
  For off-plan property sales, payments are staged and usually linked to construction milestones of the scheme.

Property inspection (snagging)

It's always good practice to take possession of a new property after conducting a thorough inspection of everything included with it. Commonly known as snagging or property inspection, this process will help reveal any defects or shortcomings in the property before you take legal possession of it. Here's how a typical snagging process unfolds

Inspection meeting
The seller or property developer will arrange a meeting after you've checked the property and shared a list of all your concerns or things you would like fixed. From internal leakages to paint stains or even new door knobs, you can share a list of all your grievances and seek improvements if needed.

Feature demonstration
A brand-new apartment or house will have new appliances and electrical features the developer will need to explain to you before handing over the keys. From central heating to the plumbing and light features, the developer will share all necessary information.

Completion of purchase

Completion occurs when you make the final payment to your solicitor, covering 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, the process 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 the required SDLT, a percentage of the property's value to HMRC. SDLT applies to property 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 producing relevant documents like utility bills, bank statements, or phone usage records. The surcharge does not apply if you lease the property for seven years or less from the date you take possession.

If multiple buyers are involved and at least one is a non-UK resident, all buyers are treated as non-UK residents and will incur the surcharge. However, if you are married or in a civil partnership and one partner is a UK resident, both will be considered UK residents for the transaction. Your solicitor will calculate the SDLT amount and prepare your Stamp Duty Land Tax return.

Additionally, you can also use our stamp duty calculator to calculate your SDLT liability.

One stop service

At Benham & Reeves, we provide a comprehensive service package, designed specifically for Malaysian and overseas property buyers to ensure a smooth and hassle-free experience in London.

Our wide range of services include

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