At the end of September, the recently appointed Chancellor, Kwasi Kwarteng announced a number of changes in the 'mini budget' as part of his statement on the Governments new Growth Plan, to tackle the recovery from the COVID pandemic and energy price pressures. The announcement, however, has caused some uncertainty, with economic policy in the UK coming under scrutiny and sterling reaching $1.03 on 26 September; a record low.
Away from the wider impact on the economy, the record low could indeed benefit those holding foreign currencies looking to enter London’s ‘prime resi’ market. Recent research by Alliance Fund shows heightened activity amongst foreign buyers in the US, with the average home now costing them -14% less across the UK and -16.5% in London. With the pound being so low against other currencies across the board, this makes purchases comparatively cheaper, with relative savings to be had at higher purchase points when making cash purchases.
However, as a result of the sliding pound, the Bank of England has increased interest rates to 2.25%, meaning overseas buyers who are able to make cash purchases will be at an advantage and can protect themselves from this impact of the pound weakening.
Take home message
London has become increasingly popular to foreign buyers in recent years anyway, not least due to Covid restrictions being eased before over countries and with 48% of central London purchases being attributable to foreign buyers this year, the market’s popularity to these stakeholders looks set to remain and could grow further.
The current monetary conditions are unprecedented and although markets have somewhat calmed from the initial shock of the new Chancellor’s reforms, it remains to be seen whether or not the pound will remain weak for a prolonged period. In any event, overseas buyers can take advantage of the present situation and obtain prime residential assets in London with, what can be seen to be, significant comparative savings.