The UK property market has long been an attractive proposition for would-be foreign investors. If it’s not for the romance of retiring to the country of Shakespeare and Sherlock Holmes, then it’s for the potential gains so often achieved. Even against the backdrop of coronavirus, there’s still appetite from individuals and businesses overseas – eyeing up the UK for their next move.
At the start of 2020, it was investors from China and Hong Kong who were leading the way. In part, this came down to the feeling that Brexit would be settled one way or another. According to Jones Lang LaSalle, Chinese and Hong Kong buyers were stepping up their interest with the expectation that the UK’s split from the European Union would soon be resolved.
The impact of the Pound’s falling value
Since the issue of Brexit first reared its head in 2016, the value of the British Pound (GBP) has been far from stable. For traders who use forex platforms such as Tickmill to track movements in the currency market, it has been a question of picking the perfect time to make their money go further in the UK.
A report from Hamptons International sets out the situation in no uncertain terms: “A [London] home that would have cost a US dollar buyer £1m in January 2015 cost £856,610 in December 2019, 14% or £143,390 less – solely due to currency movements”. For Hong Kong investors, a UK home certainly proved better value in mid-2019 when the Dollar (HKD) hit a two-year high.
But it’s not just about the Pound’s woes. New factors are sure to draw more foreign investment into the UK property market. Not only are interest rates at record lows, but stamp duty reforms are speeding up decision-making. From April 2021, foreign investors and expats will have 2% added to the cost of stamp duty in the UK. Unsurprisingly, such buyers are not hanging around.
The evolution of buy-to-let and build-to-rent
London has long been an investment hotspot – but it’s no longer alone in driving returns for an overseas investor prepared to dig a little deeper. Out into areas such as Leeds, Manchester and the Midlands, regional markets were reporting rapid growth. And, in doing so, were threatening to loosen London’s grip on inward property investment – if it has not already been lost.
One reason for this ‘redistribution’ of inward investment has come in the private rented sector. There’s record demand for rental properties, which will no doubt appeal to buy-to-let investors. But the UK’s emerging build-to-rent market is also starting to create exciting opportunities for foreign investors; the number of units completed outside of London rising by 51% in 2019.
Covid-19, Brexit and the future of the market
The growth of build-to-rent (and the wider private rented sector) is one possible solution to an undersupply of housing in the UK. But maybe this is music to the ears of foreign investors who can service that demand. Of course, that demand isn’t centred on one location either – it’s an issue in every region, so investors could easily just stick a pin in the map and choose.
There is also the impact of coronavirus and Brexit to think about. If one or both of these leads to UK house prices hitting a plateau or even falling, foreign investors will find yet even greater opportunities. In fact, it’s predicted that wealthy Chinese investors are about to spark a house-buying boom in the UK. With economic conditions as favourable as they are, it’s little surprise.