Who might have predicted that the “Brexit” vote – as unlikely as it was — would give us one of the best opportunities to buy UK property in 30 years?
With the UK voting to become independent, British leaders must painstakingly renegotiate trade deals with more than 40 countries in just two or three short years. And with uncertainty still lurking, both the pound and the UK real estate market have become out-of-favor investments.
But some investors are seeing this as a historic opportunity to buy UK property at bargain prices. Here are some of the best reasons why it may be a great time to buy physical property across the pond or invest in funds with UK real estate exposure.
1. The weaker pound means UK homes and other properties are 10% less expensive in dollar terms.
The average UK home is priced around £206,000, according to top UK real estate agency Nationwide, which had translated to about $297,250 just before Brexit. With the pound’s value falling to 30-year-lows near $1.30, the average UK home costs around $267,000 – meaning you’d pay $30,250 less than you would have mid-June.
2. UK home values could recede for the first time in years, opening up a rare value opportunity.
Housing shortages have pushed UK prices up nearly 40% since March 2009, according to Nationwide’s data, while London home prices have doubled. But with Brexit uncertainty and new sales taxes dampening demand, the agency expects UK home prices to slow to 2.5% in 2016 and fall by 1% in 2017. Even better, they forecast home prices in prime central London will fall by 6% this year and remain flat in 2017, giving you a rare chance to pick up Britain’s best property at a discount.
3. British commercial real estate is less pricey too.
Recent figures from data firm MSCI showed UK commercial real estate values fell 3% (with London offices falling 3.8%) in July alone – the largest drop since March 2009 – due largely to Brexit uncertainty. Other real estate investors are seeing even larger discounts, with offices selling from 5% to 19% off their pre-Brexit prices.
3. Rental rates are soaring with continued home shortages and unaffordable housing.
Now is also a great time to be a landlord in the UK despite the recent reversal in property values. The latest survey from rental agency Your Move finds that private monthly rental prices across England and Wales averaged £846 in July, reflecting 5.2% rise in just one year. In South East England, rental rates spiked 14.9% from a year earlier as Londoners fled the high rent prices of the city to find cheaper digs farther away.
5. Mortgage rates in the UK are down to record lows.
Here’s the cherry on top for those needing more buying power. The Bank of England’s recent interest rate cut has led to the lowest UK mortgage rates on record, with the average two-year fixed mortgage rate falling to just 1.66% in August and the average five-year fixed mortgage rate dropping to 2.42% (note: Unlike 30 year fixed US mortgages, UK lenders typically short-term fixed loans that may be renegotiated after the term ends).
The Bottom Line
Want to take advantage? You may consider looking at funds with high UK exposure or working with an international payments specialist to help you physically buy property abroad. Given the weak pound, discounted property values, and the cheapest access to cash on record, you’d be hard-pressed to find a better opportunity to invest in property in a place as desirable as the UK.
Christian Hudspeth is a Financial Writer for World First USA, Inc.
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