It’s no secret that the UK economy is suffering due to Brexit and it’s taking its toll on the pound.
With the pound’s performance hitting a two-year low, is now the right time to invest in the UK property market? Let’s take a look at why the Sterling is suffering and why it could be good news for investors.
Why is the value of the pound falling?
A mixture of economic slowdown and other contributing factors are partly to blame for the pound’s decrease in value. In July, Sterling was trading just below $1.25, the lowest rate against the dollar since April 2017.
However, the ongoing uncertainty surrounding Brexit looks to be the main culprit. With the UK leadership battle still to be decided, uncertainty has now turned to complete confusion.
The result of the Conservative leadership race will heavily influence the outcome of Brexit. Ultimately, the deal that the UK leaves with (if there is one) will be pivotal for the housing market and the economy as a whole.
Regardless of who is in charge of brokering the deal that sees the UK leave the EU, one thing is for sure. The October 31st deadline is fast approaching, and with it, so is the chance of a ‘no-deal’ Brexit. This could cause even more problems for the pound, causing its value to drop even further.
It might be bad news for some, but the current strength of the pound represents a unique opportunity for savvy investors.
What does all this mean?
Over the past year, the pound has become the worst-performing major currency. It’s not just the dollar that is outperforming the pound. According to Bloomberg, the pound has also reached its lowest value against the Euro in six months.
A visual indication of the performance of the pound. Source: BBC
Figures from the Office of National Statistics show a rise in US tourists arriving in the UK. Before the EU referendum, $1 was worth around 68 pence. That is now worth about 80p.
It’s not just holidaymakers visiting the UK who can reap the benefits. Good exchange rates against the pound also means you are getting more investment for your money when buying in a foreign currency.
The impact on property
The current position of the pound is good news for those who are paid in a foreign currency. If you are looking to invest in property, you now get more for your money.
Even with Brexit looming and the current strength of the pound, the UK property market is still seeing growth across a number of regions.
The latest figures from the ONS revealed the North West had the highest annual house price growth at 3.4%. The average house price in the region has also increased from nearly £159,000 in May 2018 to just over £164,000 in May 2019.
The West Midlands saw the second-highest annual price growth at 2.7%. London continued to be the region with the highest average house price at £457,000.
Another area that has seen an increase is rental yields. This is even more good news for potential investors who are interested in property on a buy-to-let scheme. Office of National Statistics (ONS) data showed an increase of 1.3% in the 12 months to May 2019.
Foreign investors, or those paid in a foreign income, can take advantage of the exchange rate against the pound. This means investors are getting more for their money than they have in previous years, but this won’t last forever.
The pound will make a strong recovery by the end of the year against the dollar and the euro, according to experts at HSBC. Their projects suggest a 7.5% increase against the dollar by the end of the year and an 11.4% increase against the euro.
With the current strength of the pound and growth in UK property prices, makes the UK property market an extremely attractive option.
If you are interested in UK property investment, our property experts are on hand to guide you through the process and assist every step of the way. If you would like to find out more contact us using the form below.
