The penny, or rather the pound, has dropped – savvy buyers overseas are grabbing the opportunity to snap up UK off plan property for a substantial discount. On the dawn of the referendum result, the pound plummeted to historic lows before most Brits had even had a chance to drink their morning tea. Overnight, the country had changed, and the dynamics of the property market were altered.
Foreign investors now have superior buying power in the UK’s off plan property market. Buying when the exchange rate is so favourable means that they can pick up an off plan home at a bargain price, then sit back and allow the market to settle in the wake of the Brexit decision while the property is built.
Ray Withers, CEO of Property Frontiers, reported a spike in interest from the US. “Here at Property Frontiers we’ve experienced a noticeable surge in enquiries from overseas buyers in our off plan properties since the Brexit vote,” he said. “In particular, those investing in dollars are turning to the UK as they can get a great deal more for their money thanks to the weakened pound.
“Not only are foreign investors getting more for their money, but opting for off plan means that any short-term price fluctuations in the property sector can sort themselves out by the time their off plan purchase has been constructed.”
International property portal Properstar reported a 50% surge in searches for property in London, and it expects this trend to continue. “Following the decline in sterling, we heard reports from agents of international buyers rushing to conclude property deals,” said Shameem Golamy Managing Director. “It’s no surprise when US buyers can now acquire UK property at a third less than a year ago.”
Although US buyers are in a particularly strong position, given the battering the sterling took against the dollar, investors from emerging markets are also eyeing off plan property in the UK. “We have experienced a surge in enquiries over the past week from Hong Kong and China on the best available property investment opportunities in the UK and there has been specific interest in city centre off plan opportunities in Manchester & Liverpool,” said Paul Mahoney, Managing Director of Nova Financial.
“We believe this is due to the devaluation of the pound which has essentially made UK property circa 10% cheaper for overseas buyers,” he added. “Those specific areas were already affordable and strong rental yields which is attractive to overseas buyers.”
According to Golamy, this gives property developers a unique opportunity to reach out to new markets. “We know foreign buyers have a tendency to lean towards new build and developers have always been good at talking directly to this market,” he said. “For residential developers, and especially those with properties in prime locations, the ability to market to international buyers and a global market has never been so important.
“The challenge is to know which foreign markets to bet on. In the past we have seen developers promote directly in country through property shows and local advertising, but with the markets so volatile at the moment, it will be hard to know which markets to commit to. We expect to see developers turn towards lower cost digital solutions, where returns on investment are fast and easy to measure, to promote their developments.”
If banks become shy about lending and investment from the EU is snapped back, foreign investors could provide a vial lifeline for developers. “Longer term, this interest will serve the property sector well,” said Withers. “The UK’s serious shortage of homes means that all investment is welcome when it comes to new builds, so a surge in investment now spells good news for tackling our long-term lack of housing.”
Just as it is vital for housebuilders to build more homes, it could be just as vital to build bridges beyond the EU to keep investment coming in and homes going up.