Is Foreign Investment in London Property Set to Rise?
One perhaps unforeseen consequence of the Referendum result is that foreign investment in London’s property market is set to increase.
Estate agents have noted a rise in the enquiries from Chinese, Middle Eastern and even some European buyers after the pound’s value took a nosedive in the markets. This made the foreign exchange rate favourable for overseas buyers looking to take advantage of the fluctuation.
Sterling is likely to increase in value as the terms of Brexit are made clear and other issues, such as the new Prime Minister, are resolved. Foreign investors are thus seeing this uncertain post-Brexit period as an opportunity window before the pound clambers back up in value.
With UK investors showing signs of caution following the Referendum, overseas buyers from all over the world, especially those outside the EU zone, are looking to take swift advantage of the situation.
David Adams, the managing director of luxury estate agents John Taylor said that:
“I was inundated with more calls from the Middle East on Friday (the day of the Referendum announcement) than any other day of my career.”
Likewise, the founder and chief executive of eMoov, Russell Quirk, has noted a sharp rise in the number of buyers from China and Singapore compared to a weekend earlier.
Another reputable estate agent, Stirling Ackroyd, has estimated the financial effects on London’s property market overall. In terms of EU investment, buyers could gain a €51,000 (£42,000) discount on their purchase.
Other forecasts show that the average price of a house in the capital equates to just €579,000 – compared to a record high of €630,000 in November 2015. European speculators, perhaps concerned about the future of the euro themselves, may be looking to the UK as the most lucrative investment area.
Savings will be made through various currencies too. For example, Douglas & Gordon indicates that property values in the capital’s emerging prime areas could be around 20% less expensive in US dollar terms.
The vote has also reverberated across Asia, where Chinese, Singaporean and Hong Kong investors especially will be constantly monitoring the market for promising buying opportunities.
Some Foreign Caution
The situation isn’t as simple as international investors buying every property in sight due to favourable currency variations. In fact, a prominent bank in south-east Asia, the United Overseas Bank, advised customers to be cautious when considering the UK market.
Guy Watson, the managing director of Champions, an estate agency based in Knightsbridge has been quoted:
“A lot of investors from Hong Kong and Malaysia just want out, so much that they will accept around 15 per cent less what they paid for it two years ago.”
However, overseas concern regarding the London property market post-Brexit has been rare. Britain will always be a draw for foreign investors, as PrinvestUK’s managing director Aaron Campbell explains, because it offers “good returns in a structurally undersupply market [sic]” and the standard of living is very high.
The general consensus is that, despite this period of uncertainty, house price growth across the UK’s major towns and cities will continue upwards after the Brexit storm has passed. Prices usually follow the law of supply and demand – and there is a lot of demand in Britain – rather than sheer speculation.
Despite plans for foreign investment to be slowed down by new London Mayor Sadiq Khan, principally by advertising homes in the UK before doing so abroad, the Leave vote is likely to have the opposite effect as investors seek to take advantage of the pound’s temporary fall in value.
For more information on Brexit’s effect on the UK housing market, check out Brexit News on Property Investment.