In the aftermath of the revelation by Liz Truss and Kwasi Kwarteng that they intended to slash the top rate of tax, the pound, already weak against the dollar, slid perilously close to parity. It’s a far cry from the halcyon days of over $2 to the pound in 2007. And though sterling has since recovered a little, mainly because of the intervention of the Bank of England (by contrast, the government u-turn, keeping the top rate of tax in place, has had little appreciable positive effect since it simply looks like yet more chaos), it is still far from strong. But what does the ailing pound mean for foreign buyers of prime London property?
How Much of a Saving Does The Weak Pound Give to US Buyers?
In short, dollars-based buyers can now purchase a central London property for as little as two-thirds of what it would have cost them in 2014, even though for domestic buyers the nominal price of that property would be the same or more expensive than it was eight years ago. Eight years ago, the pound was worth $1.71. Now it loiters around $1.08. The likely consequence is an influx of overseas buyers, as happened in 1985, the last time the pound sunk so low. And if anything, it could be even greater this time because a larger number of countries, well over 60, are linked to the dollar. Homebuyers from the United States are the primary beneficiaries, with recent research by Alliance Fund revealing that an average home in the UK will cost them nearly 15 per cent less than at the start of the year, with an even bigger saving – 16.5 per cent – if they buy in the capital.
At the outset of the year, an average UK house was worth £272,833 and with the exchange rate at $1.36 to the pound, this meant a dollar price of $369,825. Now, ten months and two Prime Ministers later, while the average cost has increased for domestic buyers to £292,118, with the exchange rate at $1.08, the price for Americans is $314,932. It’s a massive discount for dollar buyers.
What About Buyers From Other Countries?
Alliance Fund’s research makes it clear that the US is far from the only beneficiary of the current situation. So while those of us in the UK are commiserating, it’s a time of wild celebration, from Hong Kong to the UAE, from Canada to India, and from Australia to China. UAE buyers are looking at a saving of over 16 per cent for London properties, while for Hong Kong buyers it’s about 15.6 per cent and for those in Singapore, it’s a tidy 11.3 per cent. In the Euro Zone, the situation is more tempered and the saving on London properties is a non-earth-shattering 1.8 per cent. The picture is only inverted if you bring Japan into play where the Yen’s weak performance against the pound means Japanese buyers are looking at an increase of over 5 per cent for London properties (and that goes up to 7.3 per cent across the UK).
What Happens Next?
Given that government intervention has done nothing to improve the strength of the pound, forecasters predict that buyers from the US, Hong Kong and the UAE will continue to save on UK property for the time being, but that most of their activity will be confined to prime central London. It’s a considerable boost given that foreign demand subsided during the two years-plus of the pandemic.
What Does It Mean For People In The UK?
In stark contrast to the merriment and jubilation of overseas buyers, the picture for people in the UK since Kwasi Kwarteng’s mini-budget tanked the pound is decidedly sombre. Interest rates are likely to increase, with forecasters predicting 6 per cent by May 2023. Mortgage rates will go up, dampening the buying power of households and prompting a housing-market slow-down. The Bank Of England has already put interest rates up in an attempt to leaven inflation and may now feel they have no option but to raise them further. Of course, currencies are always in a state of flux, but the plummeting of the pound is different to the normal day-to-day ups and downs of a currency. It’s severe enough that the cost of all goods and services imported to the UK has become markedly more expensive, thereby driving inflation ever upwards. It’s entirely possible that by May 2023, payments on a £200,000 mortgage would increase by over £400 a month, deterring new borrowers. People on variable-rate mortgages are advised to remortgage as soon as possible to protect themselves.
How Anthony Ward Thomas Can Help Overseas Buyers
Anthony Ward Thomas is the removals company of choice for all central London boroughs – Westminster, Kensington & Chelsea, Camden – and beyond. The company has built its reputation through an unceasing pursuit of excellence – an excellence apparent in every one of its outgoing, thoughtful, initiative-taking staff members. If you’re an overseas buyer, we’re set up to help you thanks to our global network of trusted partners. We can take care of your move to London, plotting out every stage of the endeavour in order to minimise your stress. If you’re buying a London property but letting it rather than occupying it yourself, our movers, drivers and packers can help you in the process of furnishing it. All our services – large removals, international removals, Man & Van, office removals, storage and packing supplies – dovetail effortlessly with each other. You can delegate every single aspect of your move to us, including all the planning, the buying of boxes and packaging, the packing-up of your goods, placing boxes into shipping containers and then, at the destination, undertaking all the same steps in reverse, leaving you with a London property that’s completely habitable from Day One onwards. We’re also able to take care of the knotty, bureaucratic issues that arise at customs.
Start your journey with Anthony Ward Thomas today by calling us for a free, no-obligation quotation.