Brexit negotiations are underway that will decide the nature of relationship of the UK with the EU. After Brexit referendum that saw nearly 52% of the population casting their votes in favor of a separation from the EU, the process of withdrawal started. UK has time until 30 March 2019 to formally secede from the EU. The decision to break away from EU has seen nervous sentiments of the British economy and real estate sector has behaved along expected lines. The longer British government takes to formally announce a deal with the EU, the stronger will be the reaction of the foreign investors who have already shown a decline in their buying spree.
Pound suffered a decline of nearly 10% soon after the referendum took place in Britain.
British Pound has been weakening after the referendum
Brexit is not going to be a onetime event. It will have far-reaching consequences and implications on not just Britons living and holding properties in EU countries but also all foreign investors buying properties in UK. One big reason why these people are jittery is that of the fluctuation in the price of the British Pound in relation to the Euro. Pound suffered a decline of nearly 10% soon after the referendum took place in Britain and so far, it has failed to recover these losses. Weaker Pound means it can buy fewer Euros than earlier. More than 2 million Britons live in EU countries. Properties of these Britons have suddenly lost a lot of value in terms of British Pound. These Britons are now putting on hold their plans to buy properties overseas.
The period soon after Brexit was full of uncertainties
Stronger Euro means it can buy more Pounds. With the UK property market showing signs of stagnation and decline in many parts of Britain, especially capital London, it seems Britain is now a very attractive destination for foreign real estate investors. However, foreign buyers are showing a reluctance to buy properties in Britain which were not the case before the referendum. The UK was the topmost destination for foreign investors and properties in London fetched a premium because of a strong demand among international buyers. But now, a majority of these foreign buyers are adopting a wait and watch approach as clouds of uncertainty is hovering over the UK property market and UK economy in general.
Many experts feel that this decline in the property market in UK is a result of the Brexit fear and investors would return to it undeterred by this uncertainty. There are many experts who feel that fall in prices of properties in London and elsewhere in UK has nothing to do with Brexit and it is a market phenomenon where correction is taking place. Prices were increasing continually for more than 5 years and they were becoming unsustainable in the long run.
Investors that shied away from UK property market after the Brexit referendum are showing signs of confidence. The housing market of the country is bouncing back largely because of the buying activities of these foreign investors.
The confidence of foreign investors is back
According to a report published in The Times based upon research carried out by Hamptons International, investors that shied away from UK property market after the Brexit referendum are showing signs of confidence. The housing market of the country is bouncing back largely because of the buying activities of these foreign investors. The number of properties sold to foreign buyers in London this year makes up for 13% of the total number of sales. This percentage was 10% last year. This is interesting considering London was the center of all the fear-mongering and negative sentiments surrounding Brexit. These buyers have shown a strong interest in properties in other regions of the country.
There are many experts who attribute this increase in numbers of foreign buyers solely to a weaker Pound in respect to Euro. A stronger Euro is attracting foreign investors to English shores with a falling Pound making properties in UK attractive for them. Pound feel by nearly 0.8% more in August 2018 and it is trading at Pound 1.110 to a Euro.
It is still not clear how foreign investors will react if there is no deal over Brexit by 30 March 2019. Only time will tell what impact it will have on the confidence of the foreign buyers. But the UK property market is showing signs of resilience after initial hiccups and it is standing strong and proving attractive for foreign buyers.
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