The talk is still about the fallout from Brexit for property investors across the UK and international investors. Sterling had fallen 5% before the leave/remain vote when it became clear that the UK might choose to leave the EU. Once the choice to leave was confirmed the instant faltering of sterling against most major currencies confirms that there is a great investment opportunity for international investors during 2016 and probably well into 2017.
Although sterling has pulled back some of its losses after reaching a 31 year low against the US dollar, the immediate investment gains show the Euro up 6% and the US dollar up another 10% against the UK pound.
Population increase confirms property shortages
There is a dramatic shortage of properties across the UK. This follows an increase in the population of around 7% during the past decade. With around 63 million people in the UK at present, the increase is similar to adding the population of Manchester each year.
Government statistics suggest that an additional 250,000 properties will be required every year for the next 20 years. As properties containing single people will increase by 3.2 million, the demand for new build property expands. 20% of households will contain single people within the next decade.
The government’s pledge of building 200,000 properties a year is currently a long way behind and even if they reached their target, this will still fall short of the total required.
New property being built is currently less than the 1920s with rental requirements up 100% from 2002. The government forecasts that 20% of homes will be rented by the end of 2016 pushing up the demand for investor properties.
Growth of property in the North West of England
Both Manchester and Liverpool lead the North West as property boom areas, showing growth spurts for new housing, with many property purchases being completed off plan. Salford Quays is a prime example of a recent regeneration programme in Manchester. A short drive around Manchester and Liverpool confirms that many residential and commercial new builds are in progress, offering substantial investments from overseas, after the fall of sterling.
The value of property will almost certainly rise over time and demand continues to outstrip building, although many feel that property prices may not continue to rise after Brexit. Nevertheless, owners are not reducing property prices, leaving overseas investors looking at a 10-15% discount in August 2016 prices compared to April 2016. This may be further stimulated by the announced lowering of interest rates to 0.25%.
Growth of future building plans
The press has been full of speculation and facts about how overseas investors are buying up every available property in London. This means that astute investors will look elsewhere across the UK for their next options. The Northern Powerhouse is already set up to increase the numbers of properties in the close and distant future. This offers a good level of protection for capital investments, while producing an ever increasing income from rented residential and commercial property.
Although changes to property build plans can occur, nothing happens overnight after the Brexit vote, so many plans already in place will continue as demand continues to call for residential and commercial property across the North West.
UK equity prices increase to show confidence in the UK market.
Even where good property purchases are to be found, there is still a worry about the future economic performance of the territory. Everyone has to consider their getting out strategy, not just how to buy for a bargain price.
Following a small fall on the day after the leave/remain vote, the UK stock markets have continued to grow steadily upwards. This proves that investors have confidence in the UK market. Some major investors have decided not to enter or extend their UK positions recently, but equally, many large global organisations have seen the UK as a strong economic centre and expect that to continue.
The BBC suggested that it is inevitable that interest rates will fall soon, but also confirmed that a downturn in the economy was still seen as a 50/50 chance, therefore, with no known outcome. Furthermore, they offered the comment that a recession was unlikely and that investment was looking good for the future. These comments will help boost international investors to look for deals that are available and in the near future.
The property market moves relatively slowly, compared to other investment opportunities. Any changes in the market are unlikely to occur overnight, but serious investors should make the most of the opportunities sooner, rather than later, to maximize the lower sterling strength.
Property agents across the Northern powerhouse have been swamped with calls from overseas investors looking for property bargains at a sterling discount, because they understand that sterling will return in value at some stage. As some UK purchases may falter, because of uncertainty, this leaves more property available for investors from abroad.
In particular, European buyers may consider UK property a good discounted purchase at present with average property prices showing a discount of EURO 20,000 against the average price across Manchester and Liverpool, and EURO 45,000 in London. This is the moment to select real bargains for overseas investors, with demand outstripping supply and large discounts available.