The Falling Pound Brings With it Investment Opportunities.
“Those who put their capital into investments in the UK could see their returns boosted by the depreciating sterling”.
The pound has currently hit an all-time low against the dollar after Kwasi Kwarteng’s budget announcements last week threatened to erode confidence in the UK.
The pound fell by nearly 5% at one point to $1.0327, its lowest on record since Britain went decimal in 1971. Currently, the sterling will buy back $1.0566. In an attempt to steady the markets on Monday (26th), the bank of England said it will “not hesitate” to raise interest rates. However, the pound fell after the statements from the bank and its governor Andrew Bailey amid concerns that they had ruled out an emergency rise in rates.
But while many UK citizens will be worried about their economy and purchasing power, foreign buyers and investors are elated by the news.
The Weak Pound
It could potentially be good news for long-term investors seeing returns within an uncertain market, as those who put their capital into investments in the UK could see their returns boosted by the depreciation of sterling.
Analysts at HSBC and Capital Economics have predicted house prices may fall by 12% – 14% over the next couple of years around central London but the falling pound could hold prices steady.
“To put this into context, a buyer purchasing £1 million worth of property in the UK with American Dollars would save around £160,000 on what it would have cost them last year for the same property”, said Chris March, property director at London City Auctions.
“This is exclusively down to changes in currency values, with the dollar performing strongly ”, he adds.
It is one of the prevailing factors influencing investors back to the UK. Demand in London property from foreign investors is at ‘pre-covid’ levels as foreign investors account for 48% of all homes sold in prime central London, a 13% increase from 2021. Nearly 5% of those purchases were to Americans. This is likely to increase within the near future as European competition falls due to the weaker euro.
Buyers from the Middle East can also take advantage, as the majority of their wealth comes from oil, where the price is pegged to the dollar.
“With the dollar remaining strong, this means American investors or other buyers pegged to the dollar, such as Bahrain, Kuwait, and UAE, are to gain the most,” said Tom Barrett, Sales manager at London City Auctions. “Buyers who were once hesitant are now pulling the trigger as their savings could be in the millions. It truly is a once-in-a-lifetime opportunity.”
Interest surge from foreign buyers
Reportedly, estate agents have seen a surge in interest from foreign buyers. Since Brexit, there has been an increase in inquiries and interest but demand will continue to grow for the foreseeable future as international investors find UK investments and assets cheaper, thanks to the weakening pound.
“For those looking at medium to long-term investments, the weakened pound could provide a real window of opportunity to capitalise on. UK property has always been seen as a safe, long-term investment, but with the pound currently sitting at where it is, an despite the UK economy facing headwinds, along with many other economies, the UK property market still remains a safe and stable investment opportunity.” Said Chris March.
It’s not just investors and buyers who can benefit from the currency exchange though, as those selling their properties in the global market can benefit too. Ensuring that your property is marketed to foreign buyers can give you a much larger pool of potential buyers.
Sellers should focus on potential buyers from countries that are pegged to the dollar as they will have more buying power. Regions such as North America and the middle east especially, as investors are eager to take advantage of the UK property market.
What can we do to help?
Here at London City Auctions, we pride ourselves on our industry experience and connections, both domestic and international. Our office in the Middle East, Bahrain to be exact, came about through years of networking and building relationships with high value investors and real estate traders, and means we have direct contact to a vast pool of eager potential buyers. A portion of our team market directly to over-seas markets, taking advantage of our established communications could mean that, in a time when buyers a hesitant at home, you can still sell your property quickly and with ease.
If you or someone you know would like to invest in or sell property, then contact our London or Bahraini office today to maximise your exposure on the global market.
To contact our London office:
Call: +44 (0)2070 789755
Email: [email protected]
To contact our Bahrain office:
Email: [email protected]
Or : [email protected]