In the aftermath of last month’s referendum result, British property buyers have behaved much as expected and slowed their purchasing activity considerably. However, the market has not suffered as much as many experts feared, thanks to an influx of international buyers helping to make up the shortfall.
London, in particular, has seen an influx of foreign interest in the wake of the Brexit vote. Demand for properties in the capital is coming from investors of many nationalities, including those from the Middle East, China, Spain and Italy. In the first few days after the referendum result was announced, UK agents reportedly took large numbers of calls from individuals and institutions based overseas, reportedly including one bank from the Middle East that wished to obtain a list of available properties for clients who were expected to begin buying at the end of Ramadan.
UK buyers have become reluctant to purchase new properties in the aftermath of the referendum thanks largely to a climate of uncertainty. In the short term, the economy certainly suffered a shock as a result of the vote in favour of leaving the EU, which was something of a surprise result. In the longer term, nobody is really sure what the consequences of Brexit will be for the property market, and until an exit deal begins to take shape it is difficult to make predictions. Some high-profile buyers specifically included exit clauses in the event of a Brexit vote ahead of the referendum, and it is reported that such clauses have been exercised in order to allow buyers to pull out of deals already underway.
However, most experts believe that property investment in the UK is still a sound choice for weathering any storms that may come, and for international investors the aftermath of the Brexit vote may seem like an opportunity to gain exposure to the market. Likely the main factor at play is the effect that the leave vote had on the pound. Once the referendum results were unveiled, the pound rapidly tumbled to its lowest value for three decades, and for international investors this means a much more favourable exchange rate when buying sterling properties.
For a Eurozone buyer purchasing an average-priced London property, the shift in exchange rates means an effective discount of 50,000 or 42,000. With the average London house price in euros hitting a record high as recently as November 2015, this sudden and pronounced discount looks all the more attractive to many investors from euro markets and beyond. Add the fact that stability within the Eurozone is somewhat uncertain at present, and it is quite understandable that some of the area’s investors are deciding that the UK’s risk profile does not outweigh the bargain prices.
When the global downturn hit in 2008, London property weathered the storm extremely well and this was down in no small part to foreign investment shoring up the market. The influx of foreign interest after the Brexit vote is being tentatively taken as a sign that a similar trend may be set to take place in the coming years as the UK’s termination of EU membership is realised.