It has been one week since the EU Referendum when a slim margin of 52% of voters in the UK voted to leave the EU and made Brexit a reality. After the vote closed, the exchange rate jumped to over $1.50 USD to the GBP, before falling away and hitting a 30 year low of $1.31 USD on Monday – which is great news for international buyers looking to invest in the UK, and more specifically, Prime Central London. The FTSE 100 also dropped following the result, but thus far, it has rallied and currently sits at close to its 9 month high. The exchange rate also seems to have stabilised in recent days leading many commentators to believe that Brexit will not be nearly as damaging for the UK economy as first feared.
Prior to the Referendum, the consensus across the property market held the prediction that a vote to Brexit the EU would have a negative impact on Prime Central London property. As with any amount of economic uncertainty, the Referendum result is likely to put at least some UK-based buyers off of making purchases in the short-term, but we do not anticipate the number of transactions occurring to drop below the levels seen in recent months. Additionally, there is a continued potential for sellers to reduce their prices, which bodes well for first time investors, seasoned developers, and anyone looking to find a bargain in the current climate.
At DC Derata, we mentioned in our last update that Lonres was reporting 49% of Prime Central London properties sold in Q1 2016 reduced asking prices before a sale was agreed, which worked out, on average, 9.1% below the initial asking price. As mentioned above, we at DC Derata, expect this trend to continue now that Brexit has been confirmed.
Other positive notes that we at DC Derata have seen in the short period since the Referendum, include: a marked increase in demand from overseas buyers since the result was announced, with one veteran London agent commenting that he had received more calls from the Middle East last Friday than any other day in his career! Additionally, of the deals that our team at DC Derata had been working on prior to the Referendum, 80% of the buyers were from abroad, and not a single buyer has reconsidered their purchase because of the Referendum result. In fact, if anything, our overseas buyers seem more motivated to get the deal done as quickly as possible to ensure that they take full advantage of the exchange rate!
As the heading of this update alludes to, uncertainty will undoubtedly bring opportunity to those looking to invest in the UK property market, and the combination of sellers continuing to reduce their asking prices, as well as a very favourable exchange rate, we believe will prove to be too much of a temptation for many foreign investors.
If you are interested in more information on the current economic climate, what Brexit means for the Prime Central Property Market, or if you’d like to see DC Derata’s current instructions, please do not hesitate to contact us on +44(0)20 7859 4501 .