2020 has proven to be a unique time for investors in the UK property market. Brexit created some uncertainty last year, but the market started to stabilise in December/January following the country’s General Election. Then the Covid-19 outbreak hit the UK and Europe in March, bringing with it a new set of challenges.
On the surface, it may seem like the present issues are making it a difficult period to invest in UK property, but in fact, now is a very good time to invest. Overseas investors are benefiting from a ‘perfect storm’ of reductions, low interest rates, high demand for rental property, the temporary removal of stamp duty and a weakened pound rate.
The current set of circumstances in the UK has made the country’s property market highly accessible. Property has always been seen by investment experts as a stable asset, and the market is going from strength to strength, particularly for international investors looking to capitalise on the weak pound rate. Here’s how the country’s political and economical stance can mean a great investment opportunity for you.
The Pound Rate in the UK 2020
As the UK pound rate declines, foreign currencies tend to grow in value. For example, GDP was 12% cheaper after the General Election in December 2019 than it was in June 2016 — the month the Brexit referendum was confirmed. While pound sterling decreased in value, the Hong Kong dollar reached its highest peak in years.
By July this year, a £250,000 property was equal to 2,465,500 HKD, which represents a saving of 164,000 HKD when compared to property prices in December 2019.
The United Arab Emirates is also seeing significant savings. In the same time frame, a £250,000 property has reduced in price from AED 1,237,250 to AED 1,168,500, which means UAE investors could save up to AED 68,750 when purchasing property in the UK.
At the time of writing, the UK is still yet to reach a deal with the European Union over trade agreements, and financial experts believe a ‘No Deal’ Brexit will cause the pound rate in the UK to fall even further. The EU has maintained a tough stance throughout negotiations, and the firmer they hold on to their position, the more international investors can take advantage of the currency rates. The UK has until the end of its transitional period to reach a deal with the EU which officially ends on 31st December 2020.
Stamp Duty Land Tax Reductions
The housing market in the UK stalled during the country’s lockdown, and the Chancellor of the Exchequer Rishi Sunak announced a temporary SDLT reduction on property sales to boost the market back to an acceptable level.
Reductions will stay in place until 31st March 2021, meaning buy to let investors only pay 3% SDLT on property purchases up to £500,000. Any property bought in this time could result in a saving of £15,000.
These temporary measures aren’t just for UK-based investors. International investors also benefit from the SDLT reductions. However, it is important to invest in UK property now before the reductions revert back to their normal rates on 1st April 2021, alongside the 2% surcharge that was announced in March’s budget.
Low Interest Rates
The UK has had low interest rates in place since the global financial crisis in 2008. In 2020, rates reached a record low of 0.1% With a low interest rate, people feel more comfortable making significant purchases, such as buying a property, so it is easy to see why the Bank of England put this new rate in place. To stop the pound rate in the UK dropping even further, they are encouraging expenditure on a large scale.
As financial interest rates in the UK have never been lower, property investors are being offered highly competitive mortgage rates. This is great news for new investors as well as existing ones. Many are remortgaging their current properties and releasing the equity to make further investments in the UK.
The Long-Term Potential of UK Property Investments
With the pound rate so low, now is a great time to purchase property. The UK market remains strong because there aren’t enough properties to meet demand. City populations are growing year on year, but houses can’t be built fast enough. People are competing for the best rental properties available, which means landlords can increase rental amounts in line with the demand.
By 2039, experts believe the amount of people renting in the UK will outnumber the amount of homeowners. The private rental sector is the fastest growing in the country and is already worth £1.5 trillion.
It is important to remember that the UK’s currency rate won’t remain low forever, so it is a good idea to purchase property now to gain the most value when the pound rate in the UK starts to rise again. A relatively low purchase price in your chosen currency could result in much higher returns providing you are purchasing property as a medium to long-term investment.
Finding the Right Advisors to Help With Your UK Property Investment
The weak pound has created a wealth of opportunities for international property investors looking to capitalise on the currency exchange. However, just because there are opportunities, it doesn’t automatically mean they will all offer value to you.
At Treo Investments, we specialise in helping clients find the right opportunity. We take the time to understand what it is you are looking to achieve from an investment. This way, you can be confident that your next investment will bring you the long term value you are looking for.
Find out more about the latest projects we are working on in the UK, by contacting a member of the Treo Investments team.