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The UK property market continues to be one of the most stable in Europe, and it is forecasted to continue growing over the next few years. With the United Kingdom experiencing financial turbulence, what does this mean for foreign investors purchasing from the UK property market?
You may be wondering whether investing in UK property is still a good idea. Mortgage rates have increased and so have house prices, so why are so many international and ex-pat property investors looking to purchase in the UK right now?
This dip has been caused by the financial and political conditions in the country. The Bank of England and the UK Government have two different statutory responsibilities for setting policy. These two policies work to achieve different financial objectives. The government’s recently announced mini-budget strategy to promote economic growth has resulted in the pound’s value reaching an all-time low. The change in rate exchanges has given foreign investors the opportunity to review their investments overseas in the United Kingdom.
|Singapore Dollar||Hong Kong Dollar||Chinese Yuan||UAE Dirham||South African RAND||US Dollar|
|Exchange rate in January 2022||1.82||10.54||8.60||4.96||21.59||1.35|
|Current exchange rate as of 6th Oct 2022||1.61||8.87||8.04||4.15||20.15||1.13|
|Percentage fall in the pound since January 2022||-11.53%||-15.84%||-6.51%||-16.33%||-6.66%||-16.29%|
The table above shows the exchange rate in January 2022 in comparison to today’s (06.10.2022) rate of exchange. We have compared this rate of exchange with six of the currencies belonging to countries where our clients reside.
Based on this information, we have analysed the cost savings that international investors would be making if they were to purchase properties in the UK now versus back in January.
According to the UK House Price Index, the average house price in the UK is £292,118.
|Singapore Dollar||Hong Kong Dollar||Chinese Yuan||UAE Dirham||South African Rand||US Dollar|
|Average UK House price x the exchange rate in Jan 2022||$531,654.76||$3,078,923.72||CNY 2,512,214.80||1,448,905.28 د.إ.||ZAR 6,306,827.62||$394,359.30|
|Average UK House price x the exchange rate in Oct 2022||$470,309.98||$2,591,086.66||CNY 2,348,628.72||1,212,289.70 د.إ.||ZAR 5,886,177.70||$330,093.34|
|Potential savings based on the current exchange rate||$61,344.78||$487,837.06||CNY 163,586.08||236,615.58 د.إ.||ZAR 420,649.92||$64,265.96|
The table above shows the average cost of UK property in six different overseas currencies. We have included how much the property would have cost based on the exchange rate back in January 2022 and the current (06.10.2022) rate of exchange.
Due to these favourable exchange rates, overseas investors could be saving thousands.
The government is aiming to build 300,000 new homes every year to meet demand and keep housing costs as affordable as possible. The actual number of properties being built is far fewer than the target; demand is still outpacing supply.
It’s important to remember that owning UK property is a long-term investment. Whilst the landlord can benefit from capital gains as house prices continually increase, the monthly rental yield available can be very attractive.
When thinking long-term, it’s worth considering that house prices across the UK have increased year on year since January 2012.
Despite the cost of living crisis and financial difficulties accrued since the COVID pandemic, the market has remained strong.
The annual rate of UK house price growth soared to a 19-year high of 15.5% in July 2022, official figures show, with a typical home having £39,000 added to its value in 12 months.
The investment opportunities in the UK are preferable to those in other European countries due to the demand for housing and increasing rental prices.
The rising prices of property mean that when the time comes to sell up, your initial investment will likely see attractive returns.
If you are a prospective or international property investor, you might be considering a new UK property purchase. The rate of exchange is good, there is demand for property in the UK and rental yields can provide a good monthly income before it’s time to sell.
We recommend speaking to an independent and whole of market mortgage adviser to explore your options.
Speak to an independent and expert mortgage adviser to find out what mortgage products are available to international buyers. Contact us here.