UK Housing Market – Foreign Buyers Benefit From Weak Pound
Ever since the pound plummeted, following the announcement in Kwasi Kwarteng’s mini-budget that the top rate of tax was going to be reduced, there’ve been losers and winners. And chief among the latter are overseas buyers of UK property. Sterling may have rallied very, very slightly, thanks to the swift actions of the Bank of England, but it’s still a million miles away from the glory days, earlier in the new millennium, when it was two dollars to the pound. Today, it languishes horribly close to parity with the dollar – and the government u-turn did nothing to bolster it. As each day continues to bring more chaos and instability, the chances for a return to a strong pound look slender. So for the foreseeable future, people who buy UK property using the dollar are in an extremely advantageous position – and the savings they stand to make are even greater if they’re buying in the capital. Research by end-to-end real estate fund, Alliance Fund, has revealed that London property can be had for nearly 17 per cent less than it would have cost in January 2022 – a huge saving. Never has it been truer that one person’s misery is another’s mirth.
Alliance Fund’s study looked into the average price of property across the UK and then in London specifically both at the start of 2022 and now. They then saw how those costs lessened when exchanged into the currencies of ten overseas nations. The results were striking.
Weak Pound Winners
The USA is, hands down, the winner when it comes to the pound’s weakness against the dollar. In January 2022, UK house prices averaged at £272,833, translating to a dollar value of $369,825 based on an exchange rate of $1.36 the pound. Today, the picture couldn’t be more different. Although the average UK house price has risen by over 7 per cent, coming in at £292,118, with a moribund exchange rate, loitering around the $1.08-to-the-pound mark, the dollar cost has plummeted to $314,932. Buyers from the States can help themselves to a stunning 14.8 per cent discount compared to where things stood at the outset of the year. The same process applied to London-specific housing uncovered an even greater saving for Americans – closer to 17 per cent.
It’s not only buyers from the USA that stand to make a killing. The native currencies of several other countries mean that the UK property market is their oyster. In particular, the weakened pound is being received with unbridled jubilation in the United Arab Emirates, whose citizens are now in an exceptionally good position to buy UK property. For them, the UK-wide discount is 14.5 per cent, while the London discount is an event better 16.2 per cent. And they’re far from alone. Homebuyers from Hong Kong look to do very well indeed, with a UK-average reduction of 13.9 per cent and, in the capital, one of 15.6 per cent. It doesn’t stop there; the affordability of London and UK property has also been given quite a boost in Singapore, with the average UK house now 9.5 per cent cheaper and the average London property an impressive 11.3 per cent less. There are also good savings to be made by people buying UK property using the currencies of Australia, India, Canada and China.
Weak Pound Losers
Countries at a disadvantage when it comes to the UK property market are few and far between. It’s mainly a time of hand-rubbing glee for foreign investors. Even in the Euro area, buyers opting for London can grab a 1.8 per cent discount. Alliance Fund cites only one territory unable to benefit from the current situation – Japan. Owing to the weakness of the Yen versus the pound, Japanese buyers are looking at an increase of 7.3 per cent nationally and, in London, 5.2 per cent.
How Long Will It Last?
With more government chaos expected, it’s unlikely the pound is going to be strong at any point in the near future. Overseas buyers, especially those from North America, the UAE and Hong Kong, have plenty of sunshine in which to make hay. Even if they don’t act straight away, chances are they’ll still make savings. Central London will be the focus of the influx – a massive turn-around after the two-year period of the pandemic, when foreign demand dwindled dramatically. Many potential buyers waited in the wings, hoping for the perfect moment to swoop – and now it’s here. Commenting on the research, Alliance Fund CEO, Iain Crawford, says, “With recent government economic intervention doing little to reverse sterling’s slacking strength, buyers from the US, UAE and Hong Kong in particular will continue to save when buying a property in the UK.” But he does sound one note of caution: “This activity is likely to be concentrated in certain areas such as prime central London and will therefore do little to alleviate the uncertainty currently pervading the broader UK market.”
What Does the Weak Pound Mean for People in the UK
For every note of wild celebration from abroad, there’s one of galling sadness for those of us here. Thanks to the pound slumping to an all-time low after the government of Kwasi Kwarteng and Liz Truss inflicted this ‘fiscal event’ upon us all, an array of consequences is being brought to bear on our lives. While many might only concern themselves with exchange rates when a holiday is imminent, the fact that our money will now go less far when we’re travelling is far from the only ramification. Factors influencing a country’s currency include interest rates, inflation and political/economic chaos. Even before the mini-budget, the pound was deteriorating against a background of energy-price rises, war in Ukraine and soaring inflation. Even though the dollar is subject to some of the same conditions, it is able to rally because it’s, by some margin, the biggest reserve currency for the world economy.
What this means for British consumers is that money won’t go as far when we’re buying goods and services that have been imported from abroad – and that, of course, includes fuel. While oil is roughly back to where it was, price-wise, at the outset of war in Ukraine, because it’s priced in dollars, the weak pound means it’s more expensive for us. The same problem will afflict products in shops and supermarkets that have been imported. Here, though, there’s a more complex picture; because much of our food is imported from Europe, and with the Euro also weak against the dollar, the increase in price shouldn’t be quite so sharp. The combination of rising food and fuel costs creates, in turn, an increasing pressure on inflation. And with inflation and interest rates going up, mortgage repayments are another thing on the rise – especially for people whose fixed-rate period has ended, leaving them on a variable rate. And, for now, when we travel overseas, the pound’s spectacular plummet will mean much less cash to play with, thanks to unfavourable exchange rates, especially if we’re holidaying in the USA.
How Master Removers Group Companies Can Help Foreign Buyers of UK Property
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All our removals companies can pack up your materials and belongings (or supply materials for you to do so), organise and execute international shipping and then retrieve everything at the destination and not only bring the containers to your property but unpack everything and then undertake furniture placement and arrange appliance installation. As a result, your London property will be fully habitable and functioning from Day One. Even the notoriously thorny and bureaucratic issue of customs can be accomplished by us, so you’re not embroiled in hold-ups and headaches.
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