Signs that currency volatility could boost UK market, especially in London

Currency volatility sparked by the decision in the UK to leave the European Union could create a scenario where overseas investors make major profits by continuing to invest and store their wealth in prime property in London, it is suggested.

Market conditions are ripe for opportunistic foreign investors, which could create a welcome increase in the level of sales enquiries received by London developers and give a lift to the British property sector, according to a report from Arcadis.

Since the result of the EU referendum was announced, sterling has fallen relative to the euro and the US dollar with further falls forecast before the end of the year. The report suggests that buyers from Europe, Asia, and the Middle East are now well placed to secure bargains in the London prime housing market by exploiting both a softening of property values and a favourable currency situation.
Furthermore, with some Banks forecasting a recovery of sterling during 2017 and agents predicting some recovery of prime London house prices during 2018, those investing £2 million now may see their investments rise by as much as £250,000 in value, according to Mark Cleverly, head of commercial development at Arcadis.
Although the appetite for opportunistic investment will depend on forecasts of further depreciation of sterling in the short term, the London prime market could soon see another influx of foreign investment. This would provide a timely boost for the UK construction sector in the long term, particularly if increased competitiveness is also matched by government funding for infrastructure, helping to underpin confidence in the new build sector.
‘The market volatility we’ve seen as a result of the Brexit vote is, perhaps ironically, going to re-open the luxury property market to overseas investors, as several of our clients have already reported a bounce in enquiries following the referendum. This influx of investment coming into the UK could boost British construction again in the future as well as giving shot in the arm to the Treasury through increasing stamp duty receipts,’ Cleverly explained.
‘For a market that, in some areas, has been stuttering for some time due to ongoing stamp duty hikes taking the steam out of buyer demand, the buying opportunity presented by recent events could be a big plus. More buyers means a more buoyant market which can only be good news for the industry,’ he added.

Already there has been a surge in interest from overseas buyers, according to Benoit Properties International due to the plunge in the value of sterling. The firm says buyers could make a saving of around 12%.
Matthew Lavin of Benoit Properties International said there has been a surge in interest in buy to let property from investors in the Middle East, Hong Kong and other countries with currencies pegged to the dollar.
Within days of the referendum result the firm sold six apartments in The Exchange Building in Liverpool to a group of buyers from Saudi Arabia who had seen the news about the falling pound and seized the opportunity. They saved around $130,000 collectively compared to what they would have spent on the night of the referendum.
‘While the market may not be as favourable for domestic buyers, and clearly there is a lot of uncertainty for business, the fundamentals of the property sector remain strong and demand will continue to outstrip supply,’ Lavin pointed out.
‘Our investors are typically looking five to ten years ahead. They see UK property market as a secure place to park capital for long-term income and growth. The added value presented by a weak GBP is an added bonus and presents an unmissable opportunity,’ he added.