Weak Pound Fuels Property Investment In The UK

Weak Pound Fuels Property Investment

The continued weakening of the Sterling Pound is creating massive buying opportunities but most of these are from overseas property investors mainly based in Asia. Right after the Brexit vote, the value of the pound significantly plummeted and most overseas investors snatched this opportunity to secure properties in Britain to make significant investment savings.

Since 2018, as much as 57 percent of homes located in the prime central London area were bought by foreign investors according to the data provided by Hamptons International. Similarly, EU investors were among the largest group of foreign buyers investing in the said area. EU investors bought as much as 19 percent of properties in the second half of 2018, up from 10 percent during the same period in 2017. Overseas investors now own as much as 36 percent of properties in the Greater London area.

In the past year alone, foreign investors from India rose by 3 percent while international buyers from Hong Kong and Russia increased by one percent. This increase in the number of overseas investors was also due to a significant drop in buy-to-let investors.

The weak value of the pound has made it much more affordable for overseas investors to purchase UK properties as a form of investment. A property which used to cost an EU investor approximately £1 million would be cheaper by at least £124,000 or more in the years to come as pound value continue to depreciate.

Prior to the 2016 referendum, a Sterling pound was worth US$1.50. It has depreciated to as low as US$1.24. After the no-deal Brexit announcement, it dipped 14% more to as low as US$1.10. Hong Kong investors believe Brexit and the weak pound is a buying opportunity. This is following a drop in London property prices in the first quarter of 2019. Foreign investors will continue buying properties in UK major cities such as Oxford, Cambridge, Edinburgh, London, and Birmingham since it will be easy and pretty convenient for most investors.

Investors Buying More Student Flats

The UK may have fewer students but this does not stop foreign investors in buying students flats. In Plymouth, one block of student flats is now owned by Middle Eastern companies following a multi-million-pound deal. A group of Qatari investors bought a Coombestone House block and are looking for more property investments in the city. Similarly, a Singaporean company also paid £180million to buy five Plymouth student apartment blocks.

This influx of foreign investors in the UK is due to the decline in asset prices secondary to the referendum vote. Significant devaluation of the pound has made UK properties an attractive investment for foreigners.

Asian Investors Banking on the UK Market

Asian investors believe the UK market is liquid and more transparent. They are less sensitive to the effects of Brexit and still believe the UK as a safe haven – a country that will remain as the world’s centre for trade and investment.

Moreover, the weakening of the pound gives Asian investors a higher return on UK assets. This is more evident for those who have US dollar funding. This gives them enough reason to invest more in the UK even if the pound remains weak.

Credit: CHGToday.com

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