Overseas investors are enjoying discounted property prices

September 7, 2022

The UK property market is a haven for overseas buyers, and the current weakness of the pound makes it even better value.

The value of the pound dipped to its weakest level against the US dollar since 1985 on Monday, with reports showing that it had traded as low as $1.1444. It has fallen by around 8% over the past three months, heavily impacted by ongoing issues such as rising inflation, the cost of living crisis and political uncertainty.

Whether or not the pound has further to fall could rest on the decisions made by the new prime minister, Liz Truss, over the coming weeks when she reveals her spending and tax plans.

So how does this affect the UK property market? As far as investment goes, the sector is proving as enticing as ever to foreign buyers, who are attracted by the stability of the country’s housing industry and are also able to maximise their budgets due to the ongoing weakness of the local currency.

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More affordable for foreign investors

The low value of sterling makes property much better value for those buying from abroad. Essentially, overseas investors are benefiting from discounts of as much as 10-15% due to the current exchange rate, compared to where it once was.

House prices in the UK have continued to climb over recent years, with some quite surprising regional variations. While London is by far the most expensive place to buy, where the average home sold for £538,000 in June this year, prices have actually seen the weakest performance in terms of appreciation.

Meanwhile, high-growth areas like the north west have seen double-digit percentage price increases, and this is predicted to continue. In Manchester, properties have sold for an average £247,859 over the past year, according to Rightmove, which is a 20% rise on 2019’s figures. While the capital will always be a popular investment target for overseas investors, the performance of areas such as the north west is attracting increasing numbers of buyers from abroad.

A recent report from Benham and Reeves, revealed that around £1.1bn of property in Manchester is owned by foreign investors, while in Liverpool that figure rises to £1.4bn. With the north west tipped to see the most significant capital appreciation over the next five years by Savills, overseas investors who buy now, while the pound is low, will see even greater gains.

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Chinese buyers tip the scales

One of the biggest buyer groups of UK property from overseas is from China. In recent years in particular, there’s been a growing trend for wealthy Chinese investors to purchase property here - mainly flats - for their children while they avail of the country’s top-class education system.

Again, the exchange rate between the pound and the Chinese yuan has favoured buyers from China, meaning effectively discounted UK property prices.

According to Land Registry data, the number of London properties owned by those residing in China increased by 24.4% between January 2020 and August 2021. In the prime property market, around 40% of all house sales priced at £10m or above were bought by Hong Kong and mainland Chinese investors.

In a separate survey earlier this year, it was found that the UK was the global destination of choice for Chinese university students, ahead of the US.

Commenting on the trends, Beauchamp Estates managing director Jeremy Gee said: “The prime London real estate market is always seen as an extremely safe place to invest when the global markets are volatile like they are at present.

“Chinese buyers tend to be looking in the super prime market in prime central London for homes for end use. That will still be the case in years to come.”

While the pound is set to remain low against the dollar at least in the short term, there could be a further influx of foreign interest in the UK property market as buyers try to cash in now and get the biggest discounts.

At The Prestbury Advisory, our team of experienced investment consultants can guide you through the process of investing in UK property from overseas. To find out more, call us on 01625 725 779, or email us at contact@theprestburyadvisory.com.

Overseas investors are enjoying discounted property prices

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