Not everybody has been left shuddering at the speed with which the pound has shed value in the aftermath of the EU referendum. While some overseas investors have indeed been put off of placing their money in the UK right now, a number of them have seen an opportunity to pick up bargain properties thanks to a sizeable exchange rate shift in their favour.
This somewhat unexpected twist is proving to be good news for London's residential property sector. This good news is all the more welcome because it comes after a rough few months for the sector. A number of tax measures designed to target property investors in an attempt to swing the market in favour of owner-occupiers were first announced, and then started to roll out. The EU referendum itself caused a slowdown which began long before the polls opened, let alone closed, as would-be investors decided to hold off in the face of uncertainty.
When, contrary to many people's expectations and many investors' hopes, the public voted to leave the EU, many expected this to be further bad news for the UK's property market and the economy as a whole. While in some ways the impact on the economy has not been as disastrous as feared, at least at this early stage, there has definitely been a profound impact. While in many ways this has included negative consequences for the property market, one area of economic damage – the rapid and significant tumbling of the pound's value against most other major currencies – has been an unexpected boon.
Indeed, this positive is serving to offset many of the negatives for London property market quite effectively. Some buyers, domestic as well as international, have indeed decided to close their purses or to look elsewhere. In isolation, this would of course represent a drop in demand, which could easily translate into the natural consequences of lower demand, most notably a drop in prices as properties become harder to sell.
However, simultaneous with the tightening of some purse strings has been the loosening of others, notably those belonging to international investors who are now keen to pick up UK – and especially London – assets while exchange rates remain favourable for them. London's increased attractiveness to these buyers has helped to balance out its loss of appeal to others, and this in turn has helped prop up the post-referendum property market, keeping values, growth, and demand more constant than they would otherwise have been.
The importance of this should not be underestimated. The last time the UK economy suffered a comparable shock – the 2008 financial crisis – not only did demand plummet, but buyers started walking away from deals in progress over fears that penalty fees and a lost deposit would be better than the potential depreciation of the property they had been planning to buy. By maintaining demand and keeping the market comparatively strong without significant fear of depreciation, bargain-hunting buyers from overseas may well be a major factor in preventing a similar large-scale collapse in buying activity from other quarters.
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