Brexit a sterling chance to invest in UK property, says director
KUCHING: The fallout over Brexit is still very much at play, especially among members of the investment fraternity.
As correctly predicted by Cornerstone International Properties, Brexit brought about uncertainty ( just as there was leading up to the vote) with the pound taking a tumble. The housing market slowed down but not at any rate worth panicking over, nevertheless. From investors’ point of view, this is possibly the best opportunity to seize the moment.
For added peace of mind, the immediate issues facing the UK is political rather than economic, as quoted from Knight Frank, a global property consultancy. No doubt, the political uncertainty could affect the economic climate. The UK government will mitigate disruptions in the financial markets as best as it can and bring certainty to the markets. Interest rates will likely remain lower for longer.
In the short term, the uncertainty of UK’s future relationship with the EU will affect trade and consumer confidence, but this is unlikely to drag out into a blown out recession as predicted by some naysayers. The UK’s economy is in good health and will ride out the storm.
Ultimately, UK is home to 60 million wealthy consumers and a high-skilled workforce, something that will remain attractive to multinational companies across the globe; Coca-Cola and BMW will still want to access a market this big; skill-based employers such as PwC and Google will always want to access such a large pool of talent, according to the same source.
Reiterating this was Virata Thaivasigamony, director of Cornerstone International Properties “while investment sentiment will be affected, UK will remain an attractive property investment destination, and it looks increasingly likely that investment will be led by Asian and US investors.
With the fall in the pound, London, the most expensive property investment location in the UK, has become more affordable and overseas buyers, for example, Malaysians, Singaporeans, Hong Kongers and even Americans, Australians and New Zealanders, now have a significantly higher buying power. The media is rife with reports of savvy investors taking this sterling opportunity to invest in the market. Knight Frank reports that the sale of prime London real estate increased by 38 per cent a week after Brexit.
At press time, the pound to ringgit value stands at £1: RM5.18 representing a 14 per cent drop. More significantly, the value of the pound against the US dollar has dropped to a 31-year low, at £1: US$1.28.
“People looking to do business in the UK now have a more level playing field with the abolishment of EU red tape, and this makes London an attractive place to invest again,” Thaivasigamony highlighted this.
Commenting on the mediumterm to long-term scenario, he said: “The inherent undersupply of housing in the UK will continue to underpin the market. The general housing shortage means that prices should rise in the medium to long term as the reticence by developers to commit to new builds will make it harder for the government to achieve its target of building new homes by 2020. This will push house prices up and the cost of renting will rise across many parts of UK as demand from tenants increase whilst new housing supply falls.”
There is good news for Malaysian parents with their children studying in the UK. The purpose-built student accommodation (a.k.a student property) proved its resilience by outperforming other assets in weathering the past economic downturn.
“We are confident that it will ride the Brexit wave well, as demand for higher education in the UK is unlikely to be directly affected because of a more attractive exchange rate due to the drop in the sterling for international students; and an unlikely change in domestic demand for higher education.”
So, is the UK economy robust enough to withstand the shock of Brexit?
“The UK has long been a global superpower with London as the world’s financial, education and cultural centre. This was the case before it became a member of the EU. But London will work towards negotiating its own treaties with other EU members while also trying to agree terms of its exit. We see London’s position as the world’s financial centre wavering in the short term, but it will regain its strength once the dust settles. UK education will continue to hold its stead,” said Thaivasigamony.
“Ironically, Brexit has probably presented one of the best opportunities to invest in a UK property. In the long term, taking advantage of the current market will allow you to reap strong returns once the UK economy picks up again,” he concluded.
Cornerstone International Properties (http://www.csiprop. com/) is a real estateinvestment consultancy based in Malaysia. The consultancy currently offers projects in cities across the UK, Australia and Bangkok, which it markets through its team in Malaysia, as well as strategic partners overseas.