As the economy and housing sector has shown positive signs in the past couple of months, this could attract more overseas investors to purchase UK property.
Over the past few months, inflation levels have been improving in the UK. Official figures have revealed that inflation has held steady at 2%, the Bank of England’s target. While the cost of living is still rising, it’s at a lower rate than previous times, particularly after almost three years of above-target inflation.
Following this news, the Bank of England cut the base interest rate by a quarter of a percentage point on 1st August. This brought down the rate from 5.25% to 5% and was the first cut since 2020.
In recent weeks, lenders have been slashing mortgage rates to compete with cheaper products. This is likely welcome news for borrowers and those looking to remortgage and could open up more opportunities for overseas investors as well.
Positive economic outlook
Lower inflation has provided momentum for the new Labour government as the UK economy grew faster than expected in May. That month the economy grew by 0.4% and rebounded from zero growth in April.
In the first quarter of the year, the economy grew by 0.7% compared to the previous quarter. And monthly data for April and May suggests a similar rate of growth in GDP can be expected in Q2 as well. This is the strongest period of growth in GDP since the immediate recovery from the COVID-19 pandemic in 2021 and early 2022.
Additionally, as the economy has performed better than expected, the average economist’s forecast of GDP growth in the UK has been increased from 0.4% at the start of the year to 0.9%. This indicates a positive outlook for the remainder of the year.
Overseas investment in the UK
How the economy performs can impact where overseas investors choose to invest. When it comes to foreign direct investment (FDI) projects, the UK has even remained second in EY’s ranking of European countries. Additionally, it was the only country in the top three to see the number of projects rise year-on-year.
The EY 2024 UK Attractiveness Survey also showed that a record high of 69% intend to invest in the UK throughout this year, and over half said they plan to invest in London.
Outside of London, the UK’s most successful city for FDI projects last year was Birmingham where projects surged by 139% from the level in 2022 to 67 projects in 2023. This is the city’s highest figure in the past decade and even more than double the total for any other city in the UK outside of the capital last year.
Improving economic conditions are helping boost confidence in overseas investment within the UK. So, we could see more foreign investment happen throughout the rest of the year.
US investors remain prominent overseas investor
In 2023, the US remained Europe and the UK’s leading source of FDI projects. And this investor demographic is a bigger investor in the UK than it is for the rest of the continent. More than one in five of all FDI projects in the UK originated in the US.
Additionally, US buyers are some of the most prominent overseas investors in UK housing. As wider economic trends can impact the property market, the positive signs currently being seen could boost investment further within the sector.
Investing in the UK property market is seen as a more predictable market. UK housing has historically recorded strong long-term growth, and increasing demand in the rental market has made buy-to-let an exciting prospect as well.
In recent years, US investors have been able to secure discounts on property purchases in the UK with favourable exchange rates compared to when the pound was previously performing more strongly.
The UK property market has also remained robust even through economic and political uncertainty. With its long-term appeal, UK property will likely remain a popular choice for overseas investors, including US investors.
If you’re an overseas investor interested in investing in the thriving UK property market, get in touch with BuyAssociation today, or explore some of our current investment opportunities here.
