Foreign buyers home in on UK as pound struggles

The British pound's weakening trend has spurred inquiries among foreign buyers for prime properties in the United Kingdom, with experts saying the favorable exchange rate presents opportunities for investors from the United States and China.

The pound plummeted to its nadir of $1.03 in September following the "mini-budget" announced during the short-lived premiership of Liz Truss, but it has since clawed back some ground to $1.16 in response to Jeremy Hunt's appointment as chancellor of the exchequer. Nerves in the market have also been calmed by Rishi Sunak's elevation to prime minister. But the currency is still down around 15 percent down from its levels in January.

Marcus Dixon, director of UK residential research at the commercial real estate services company JLL, said: "A weak sterling provides an opportunity for overseas buyers to make significant savings. Those buying in dollars are saving 16 percent in currency fluctuations alone since the start of the year, with those swapped dollars for pounds at the September low saving even more."

In JLL offices, property consultants are reporting an increase in overseas buyers looking to secure deals with payments in the dollar or in dollar-pegged currencies, Dixon said. "Some of these buyers are US nationals, but we are also seeing wealthy individuals from other areas of the world who hold dollars looking to spend these in London," he said.

According to research by real estate fund Alliance Fund, US investors are benefiting the most from a struggling pound, with the average home in July costing them 14.8 percent less across the whole of the UK and 16.5 percent less in London compared with prices in January.

Iain Crawford, the fund's chief executive officer, said: "A weakening pound has presented a great opportunity for many foreign buyers, who are now considerably better off when buying compared to the start of the year."

Some analysts noted that such activities are likely to be concentrated within specific areas, such as central London.

Ed Lewis, head of London residential development sales at property company Savills, said: "Dollar-denominated buyers currently account for at least a third of active buyers in prime central London, with the exchange rate shift — coupled with the fact the market still represents value compared to the peak."

According to Savills data, overseas activity is primarily focused on new homes priced above 2 million pounds ($2.31 million), with inquiries also coming in from North America, the Gulf states and the Asia-Pacific region.

Strong interest

Aside from the US buyers, Chinese investors have also demonstrated strong interest and are trying to take advantage of the tumbling pound.

According to Juwai IQI, a Chinese real estate portal for overseas property, in the three months to September, Chinese buyers made 2.7 times more inquiries for UK homes than in the first six months of the year.

Kashif Ansari, the group's chief executive said: "Our daily buyer inquiries nearly doubled during September's British budget crisis, which saw the pound plummet to 7.5 yuan, far below the lowest level seen in the past 10 years.

"Chinese buyers today are getting 8 percent off the price of British property compared to a year ago. That's 80,000 pounds on a 1-million-pound residence. That's a very significant saving," he said.

Dixon said: "The number of Chinese buyers purchasing properties in London has risen in recent months, with currency being a key driver. In the first six months of 2022, 18 percent of all JLL London sales were to Chinese buyers, in Q3 this rose to 26 percent."

Meriam Makiya, head of residential at Battersea Power Station Development Company, has also seen a rise in inquiries from Chinese buyers over the past three months, and she said this is no doubt drawn to London thanks to the easing of COVID restrictions and a more favorable exchange rate.

Makiya said she is expecting a further boost in interest from Chinese buyers this year. "Throughout October and November, we will be exhibiting in Beijing, Shanghai and Hong Kong, providing an opportunity for Chinese buyers to find out more about living in this 15-min (pedestrian-scale) neighborhood," she said.