Surprise UK election outcome to create brief window of opportunity for property investors

The UK’s surprise election result could create a short window of opportunity for overseas property investors, brokers say.

James Roberts, chief economist at Knight Frank, said property investors should expect downwards pressure on the pound sterling and volatility in the financial markets over the next few days.

“However, there is actually an upside to the current election result from an economic and commercial property perspective,” he added.

“The current period of uncertainty, and sterling weakness, could present a limited window of opportunity for overseas property investors to buy in the UK, or for tenants to obtain business space on favourable terms.

“This window could be very brief, as we expect greater realisation of the advantages of the hung Parliament to spread as the summer progresses.”

While the British pound suffered a 1.6 per cent fall in value to US$1.27, in the session ending on Friday, the currency fell 11 per cent against the US dollar in the aftermath of the EU referendum last year prompting a surge in interest from dollar denominated buyers. These included a Saudi-backed bid for London’s Grosvenor House hotel and private Qatari buyers purchasing office blocks at 5 King William Street in the City of London.

Mr Roberts said that he expects the value of the pound to increase again later in the year as the Conservative government is forced to abandon plans for a so-called “hard Brexit” in favour of a more fluid deal with the EU.

“This outcome may well be attractive both to institutions considering their position in the City of London and international investors looking at the UK, particularly as global events such as the Trump-Russia affair and continuing destabilisation in the Middle East is causing even greater economic and political flux outside the UK,” said Lauren Kemp, investment manager at London Central Portfolio

“[The fall in the value of the pound] is likely to continue in the current political situation, which may encourage more active investors to take advantage of discounted prices in the property and stock market,” she added.

Others predicted that the uncertainty brought about by a hung parliament would reduce the amount of new supply coming to the market.

“There’s no question that after the result that we have seen there will be a further pause in the supply side of construction,” said Miles Gibson, head of CBRE UK research. “We saw that immediately after the referendum a lot of developers saying let’s just hold, we don’t know whether the demand is going to be there for new office space and new residential. Let’s just wait and see. We will continue to see that.

“But paradoxically that may hold prices up and rents up because of course less supply but the continuation of demand coming from a strong economy means that rents and prices may well stay stable.”

However, with house prices in prime central London down by 6.6 per cent in the year to the end of April 2017 according to Knight Frank, on the back of Brexit uncertainty and new property taxes and mainstream house prices already slowing, investors say that the prolonged uncertainty is preventing potential sellers from selling.

“For us the fall in the value of the pound would make investing in UK property cheaper,” said Chris Battle, a Dubai-based British property investor who heads up the Property Hub Meetup group in the UAE.

“But actually the value of the pound is still higher than it was a couple of months ago. We’re still very keen to buy another property but we’re finding the current uncertainty is preventing people from selling and the hung parliament is likely to make that worse.”

lbarnard@thenational.ae

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