This week, reports of a weaker pound have come off the back of insinuations from the Bank of England that it would be cutting interest rates “more aggressively”.
Exchange rates can make a big difference to how for a investor’s cash can go in the UK property market, and the recent fall in the pound against the dollar and the euro could serve to lure more property buyers from overseas to UK shores.
UK property remains an extremely popular asset class for international investors for a wide range of reasons, from the country’s overriding political and economic stability, to the housing market’s proven resilience and strong capital appreciation over longer terms.
This week, Bank of England governor Andrew Bailey has revealed that the bank plans to be “a bit more aggressive” in cutting rates, provided the country’s inflation levels remain on target. At the moment, the consumer price index (CPI) is hovering at around the 2% mark, which is the government’s goal.
However, the bank is said to be watching the situation in the Middle East very closely, along with oil prices, as these could both affect inflation rates – indicating that if inflation were to take a backwards step, the decision could be made to hold interest rates where they are.
The effects of a weaker pound
Yesterday (Thursday 3rd October), the pound was down 1.13% at 1.312 US dollars, and down 0.82% at 1.190 euros.
Commenting on the correlation between Andrew Bailey’s interest rate announcement and the weaker pound, Kathleen Brooks, research director at XTB, said: “The market has used Bailey’s comments as a green light to price in more monetary loosening.
“Pound versus the dollar had already sold off sharply this week, so further downside could be limited in the short term, however, Bailey has made it harder for the pound to recover.”
Whenever there is a weaker pound against the dollar, international investors in the UK property market can find themselves essentially getting a “discount” when they buy property in the country. And buyers who find a window where they can get more for their money may be more inclined to act quickly with their purchases.
The effects of the weaker pound are felt by dollar-pegged currencies, which includes the Hong Kong dollar and the Singapore dollar.
Investors from these areas are among the most prolific in the UK property market, with Hong Kong investors estimated to own around 13.2% of all foreign-owned housing in the UK. This has accelerated since the BN(O) visa rules came into play in 2021.
If you’re an overseas investor looking for a UK property investment opportunity, get in touch with BuyAssociation today, or browse some of our current projects here.
