A plunge in the pound has underpinned a surge in overseas buyers snapping up prime London rental properties to cash in on dollar discounts – according to research from Alliance Fund*.
A new wave of demand from overseas buyers followed Chancellor Kwasi Kwarteng’s announced “mini-budget”, which caused the pound to plummet to a record low after fears were sparked over higher inflation. Despite the UK currency having recovered since epic lows in September, it is still down by a fifth compared to May last year.
The Bank of England mentioned that it “will not hesitate” to lift rates of interest. However, the pound fell after the joint statements from the Bank and its governor Andrew Bailey amid considerations that they’d dominated out an emergency rise in charges.
Demand floods back into the capital
London has already attracted foreign buyers back to its property market since travel restrictions were eased, but the weaker pound is driving demand from foreign investors to new heights. Buyers are especially drawn to some of London’s most expensive neighbourhoods, such as Knightsbridge, Mayfair, and South Kensington, to maximise the savings that can be achieved due to current exchange rates.
Only 6 months ago, a property that is on the market for £4million, would have cost around $5.23million. At the current exchange rate, the same property costs around $4.32million which is a saving of almost $1million.*
U.S buyers at the top
Overseas buyers
from the United States have benefited from the weakening pound to the greatest extent, with the average home now costing around 14.8% less across the UK and 16.5% in London.*
Alliance Fund* analysed the average cost of a property across both the UK and London, and how this has changed over the year.
They then looked at the cost of ten of the most popular foreign home buying countries and how they have benefited from a weakening pound in terms of affordability in the UK property market.
Their findings outlined that buyers from the United States have seen the biggest boost to their property purchasing potential within the UK market. Back in January 2022, the average UK house price of £272,833 equated to $369,825 US dollars at a rate of 1.36 USD to the pound.
At present, the UK average house price has climbed by 7.1% to £292,118.* However, with a sinking pound now commanding just 1.08 dollars, the average UK home is now worth $314,932 – resulting in a hefty discount for overseas buyers.
Across London, house prices have seen a 4.9% growth this year, but despite this, US buyers are now paying -16.5% less than they were back in January.*
Homebuyers from the UAE are also significantly better off when purchasing a UK property, with the average UK home now -14.5% more affordable as a result of the weaker pound, while this discount is -16.2% in London.
“Given the weakness of the British pound, we may see foreign investors buying property in the UK as the currency has depreciated that much,” said Naeem Aslam, chief market analyst at AvaTrade. This could be a once-in-a-lifetime opportunity for many.”
If you have a property to sell, get in touch with your local Ellis & Co branch today!
Alliance Fund*
