Falling pound

Falling pound restores overseas investor interest




A depreciation in the value of sterling has reinvigorated demand for prime UK residential property from overseas investors, a bridging lender has claimed.

Since the EU referendum on 23rd June, a wave of financial uncertainty has driven the value of the pound from €1.31 to just €1.12, while the Bank of England has warned that a decline in foreign investment could lead to a sharp adjustment in the commercial real estate market.

Despite this, Bob Sturges, head of PR and communications at Fortwell Capital, has revealed that this weakening of the pound has actually restored overseas interest in the residential property market.

“[We are] seeing strong evidence of increasing interest in prime and peripheral-prime residential property from overseas investors.

“This community has been subdued for a little while, but appears to have rediscovered its investing mojo.

"The fall in the value of sterling is undoubtedly acting as a driver here because prime London is now looking relatively cheap compared with its global rivals – particularly when one factors in the substantial servicing costs associated with owning high-end property.”

However, Sam Howard, chief operating officer at Regentsmead, was cautious about attributing an increase in demand to the falling pound.

“Sterling dropping by as much as 20% has provided an incentive for overseas investors in UK property, although this is offset by the increased uncertainty and potential higher input costs.

“…We have seen an increase in demand, but it is too early to know whether that is due to sterling's fall.”

Regardless, Bob explained that these investors could stand to benefit from a subdued currency.

“Some investors will be relying on this to make a killing when the pound eventually recovers to a more normal level – as it will; but others see London and the desirable parts of the South East as a good long-term bet both for their money and for lifestyle reasons.”

This sentiment was echoed by Jonathan Sealey, CEO of Hope Capital.

“Although the out vote meant that some investors have decided to stay away, the falling pound has proved to be a good buying opportunity for many foreign investors to invest in property in the UK,” Jonathan stated.

“It is important to remember that the market has proved to be much more active and extremely resilient in recent years.”

Despite these assertions, neither Fortwell nor Hope has experienced a change in the demographic of their borrowers since the EU referendum.

However, Fortwell Capital admitted that it had witnessed a rise in enquiries from potential borrowers unable to secure funding from previously reliable sources.  

Earlier this month, Fortwell Capital provided over £50m of funding in just one week, including a number of developments within London.

Similarly, Andrew Lazare, managing director of Mint Bridging, reported a difference in the size of the loan some borrowers had requested in the wake of the referendum.

“…We are still very busy and still exceeding month-on-month targets, but have seen a large number of larger loans since the referendum.

“This is due to some lenders not lending as much on big-ticket items or have had their funding lines curtailed.

“But our loan sizes are getting bigger nevertheless.”

Indeed, between September and October, Mint’s maximum loan size increased from £3.2m to £4.6m, with the larger of these two loans provided to a foreign investor.

Andrew added that the firm’s larger loans are an equal split between UK and overseas limited companies, predominantly for properties inside the M25.

Regardless, Jonathan insisted that this is not necessarily indicative of long-term market trends.

“…This really is unchartered territory, and it is just too early to tell how this will impact demand for bridging finance and what the ramifications will be.

“We must therefore continue to be confident, ambitious and take opportunities to ensure momentum is maintained in the bridging market.”

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