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Weak pound is a windfall for overseas investors ‒ Crystal Specialist Finance

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Weak pound is a windfall for overseas investors ‒ Crystal Specialist Finance

The UK has long been a favorite destination for overseas property investors thanks to the impressive returns on offer, and a recent report shows that the ongoing weakness of the pound is only strengthening the appeal.

Figures from the Center for Public Data reveal that the number of foreign owners of UK properties has trebled since 2010 and the number of homes in England and Wales owned by foreign buyers is now close to 250,000. One per cent of residential properties are registered to individuals living abroad.

The research cites the depreciation of sterling due to Brexit and more recently energy price shocks as the main motivating factors for overseas landlords, as it is now cheaper to invest from abroad and take advantage of the favorable exchange rate.

Indeed, the value of British currency has fallen far enough for foreign investors to more than cover the additional two per cent Stamp Duty surcharge that was introduced in April 2021.

Dollar strength could save your clients money

For example, the declining value of GBP compared to the US dollar clearly illustrates the savings on offer for investors right now, thanks to the weak pound.

In January this year, purchasing a UK property valued at £250,000 would have cost a dollar investor $342,500. By the end of October (when the pound had rallied somewhat from its ‘mini Budget’ hammering) but still stood at $1.16, the same property would have cost $290,000 – a saving of over $50,000.

Rental growth continues to drive yields

In addition, research published by Zoopla in September revealed that UK rents have shot up by 12.3 per cent over the last year, with the monthly average now hitting £1,051.

Rental growth was highest in London, increasing by 17.8 per cent, a rate which Zoopla described as “simply not sustainable”.

Outside the capital, growth was highest in urban areas such as Manchester (15.5 per cent), Glasgow (14.4 per cent) and Bristol (12.9 per cent).

This steep uptick in rent is linked to a “chronic undersupply” of properties, with the stock of homes for rent now 46 per cent below the five-year average. Shockingly, Zoopla said that the average letting agent now has just eight homes available to rent. This supply problem seems unlikely to change much in the immediate future while tenants stay put – either unable to (or simply not looking to) save a deposit to try to purchase a home of their own.

Off-plan could be a good plan

The opportunity on offer to foreign investors could not be clearer. Not only can they make the most of the weak Pound and purchase UK property at a lower price, the property they invest in is returning high yields for a low risk investment. These benefits can be further magnified when buying off-plan.

Here, the price is locked in throughout the construction process. This means that when the property is completed (and assuming property prices have increased during this time), your investors will essentially have bought it at a below market rate and will have instantly earned capital appreciation.

If overseas investors can lock in this below-market off-plan price when the pound is weak, then the benefits multiply and the capital appreciation becomes even more significant.

Supporting your overseas investors with their UK property portfolios requires specialist knowledge and access to lenders who are active in this market.

At Crystal Specialist Finance, we have many years’ experience of working alongside brokers in sourcing property finance for overseas clients and would be delighted to help you right now while market conditions are to their advantage.

Toby Breeden, new business director at Crystal Specialist Finance