Brexit Bargains
Overseas property buyers are sensing an opportunity as the UK says au revoir to the European Union
Property opportunities as the UK says au revoir to the European Union
With the UK still struggling to grasp the full repercussions of Brexit and prime minister Boris Johnson’s leadership, its UK property market is looking increasingly attractive to foreign investors thanks to the country’s weak currency—and the prospect of snapping up some Brexit bargains has not escaped the attention of high-net-worth Hong Kong buyers.
“We’ve seen a huge influx of enquiries and an increase in super and prime London deals being done from Hong Kong and China,” says Mark Elliott, head of international residential for Savills.
A recent Savills study calculated that a Hong Kong buyer purchasing a London property that would have cost £5 million at the peak of the market in 2014, before changes to stamp duty rates, could now buy at a discount of 33 per cent, thanks to the divergence
“We have seen a huge influx of enquiries and an increase in super and prime London deals being done from Hong Kong and China”
between the pound and the US dollar, to which the Hong Kong dollar is pegged.
Some property specialists claim even bigger discounts. “The current status of the pound means that for dollar-denominated buyers, prime London property is about 40 per cent cheaper than it was in 2014,” says Katherine O’shea of Coutts Real Estate Investment Service.
Prime properties are defined as homes valued at between £1 million and £10 million, while anything above that is classed as super-prime.
While these properties are currently priced at steep discounts compared to five years ago, they could have even further to fall. The Bank of England’s worst case scenario for Brexit predicted a 35 per cent drop in house prices. Such an extreme outcome is very unlikely, but few doubt that prices will head downward—especially in dollar terms.
On the face of it, this seems like a great time to buy luxury property in London. Sales are at a six-year low, properties are staying on the market for more than six months and buyers are getting almost 13 per cent off the asking price on average, according to Coutts.
But Elliott says that there are some potential challenges that buyers should be aware of. “You would think it would be a buyers’ market with what you hear in the press and on the ground locally,” he says. “But the reality we see is very different.”
A big part of the problem is the lack of supply coming through the planning pipeline. Elliott says there are two reasons for this: development funding is harder to obtain from banks, and local councils are less willing to grant planning permission.
At the top of the market, in locations such as South Kensington, Mayfair and Marylebone, wealthy buyers are starting to pay closer attention to the asking price and developers are no longer offering the same kinds of discounts they were a year ago.
In addition to lower supply of new-build properties, private sellers are also contributing to the supply squeeze. “Many people have built a lot of equity over the last 10 years and are therefore in a strong position when it comes to pricing and discount,” says Elliott. “They are not forced to transact and can afford to hold.”
Of course, these factors are also part of what makes prime and super-prime London properties attractive—there are generally always plenty of potential buyers. Through thick, thin and Brexit, it appears that a desirable property in Mayfair at today’s prices still has excellent growth potential.