Amidst all the fury surrounding Brexit, talk of no deals and backroom agreements, it seems that European real estate investors are still keen on London. A report by home rental website Spotahome showed that traffic on their website was dominated by French visitors representing more than 20% of the traffic with British investors making up just 12%. There was also significant interest from Spanish, German and Italian real estate investors which would suggest that the future of the UK may not be wholly linked to Brexit.
London property prices
We know that London property prices have shown a significant slowdown in growth over the last 12 months. A recent report confirmed annual growth of just 1.9% for London property prices to the end of August against a figure of 10% last year. This puts London towards the bottom end of the UK’s 20 largest cities although it is worth noting that London property prices have still increased by 1.9% even during what are extremely challenging times.
Whether this positive trend can be maintained is debatable with prices having fallen by 0.6% during the month of September. While annual London rent rises to the year ended September 2017 still increased by 1.9% this was below the UK average of 2.1%.
Currency considerations
There are a variety of different debates ongoing regarding the London property market and the UK in general. Amidst a stall in Brexit talks we have even heard whispers of a second referendum which many believe would see a vote in favour of the UK maintaining its position within the European Union. However, perhaps we need to look at the currency markets to see reasons why European investors may still be interested in the UK.
Since the Brexit vote in the summer of 2016 sterling has been under serious pressure resulting in falls of more than 20% against some of the leading worldwide currencies. Perhaps this is one of the main reasons why European investors are looking to the UK? Or could it be that a release from the strict EU trading straitjacket might actually see the UK government negotiate favourable trade terms with worldwide partners?
Let’s not forget the UK is central to the Commonwealth which in itself offers exposure to a massive economy.
Rocky road ahead for Europe
It is common knowledge that EU negotiators are determined to strike a tough deal with the UK in order to avoid other EU partners following suit. There has been a massive increase in nationalist support across Europe with many voters concerned about the threadbare democracy surrounding membership of the European Union. Despite the fact that voters have expressed a wish to retain their individual country status as part of the European Union it would seem that leading politicians in effect see Europe as one country.
In many ways the ongoing criticism of the UK decision to leave the European Union has masked issues surrounding the current and future structure of the Union. Let’s not forget that many members are still struggling, Greece is still in a mess and despite repeated attempts by the European Central Bank to inject confidence and activity into the European economy a whole this has not been a rip-roaring success.
So, is there a chance that London and the UK property market as a whole could even become something of a safe haven for EU investors?