If we take a look at the UK property market from a distance it does look as though foreign investors are buying for the sake of it with valuations stretched in some areas of the country. However, this does not take account of the ongoing slump in sterling caused by uncertainty head of the EU referendum. Many experts believe that sterling will fall further in the event of an exit which could make UK property even more attractive to overseas investors.
So, what are the short to medium-term prospects for UK property market and will the ongoing pressure on sterling have an impact?
Cheaper for overseas investors
As the pound continues to come under pressure on the currency markets it is inevitable that this will alert the attention of overseas investors looking at the UK. For some time now many people have been suggesting traditional property valuations in the UK have been overstretched but when you convert investment funds into dollars or other currencies which are performing better against sterling in the short term, the situation is very different.
There will come a time when the authorities will need to protect sterling because the lower sterling falls the higher the cost of importing goods which pushes prices upwards and impacts inflation. The authorities will not stand by and let the UK economy drown.
Will overseas investors look outside of London?
Anybody who follows the UK property market will be aware that the London real estate sector has been the most prominent in the UK for many years. The subject of overseas investors has hit the headlines recently with news of the Panama tax papers leak which cast an unwelcome light on the underlying owners of some of the U.K.’s more prominent and more expensive properties. There may well be some realignment, some investors may look elsewhere to protect their identity but in the long run it is not likely to have any major impact on the way overseas investors look at the UK market.
The subject of moving outside of London is a different matter altogether because there is no doubt there are other areas offering greater value. For those willing to look elsewhere there are some exceptional rental opportunities not to mention long-term capital growth prospects. At some point we will see overseas investors looking elsewhere outside of the main London market although the timing will depend upon how overseas investors view the perceived value of London property.
Is the Euro out of the woods yet?
Sterling has been grabbing the headlines in currency markets for some time now in light of growing support for an exit from the European Union. However, let us not forget that the Euro debacle is nowhere near over, Greece is still courting disaster and a further downturn in the worldwide economy could force countries such as Spain and Portugal into very difficult situations.
There is also the potential impact that a UK exit from the European Union would have on the Euro as well as the underlying European Union project itself. Would this spell the beginning of the end for the European Union?