Brexit Uncertainty Could be an Opportunity for Foreign Property Investors

By HopwoodHouse, 06 May, 2016

Next month's referendum on the UK's membership of the European Union is creating a huge amount of uncertainty about the immediate future of the country's property market. For many investors, this uncertainty is distinctly off-putting.

However, some those who choose overseas property investment in UK property are seeing it as an opportunity, and taking advantage of the situation to buy British assets at comparatively affordable prices.

Opinion polls have done little to indicate which way the referendum vote is likely to go, and a British exit from the EU – which has come to be referred to as a Brexit – could potentially mean significant upheaval for the property market. Exactly what form this upheaval would take is just as uncertain as the way the vote will go, but a great many forecasters are making predictions that err on the pessimistic side.

For many investors and general property buyers, this is a very off-putting situation. As such, activity in the UK's property market is slowing and the pool of potential buyers has shrunk. This potentially presents an opportunity for those who do buy properties ahead of the referendum to do so at more competitive prices, and with the balance of power in price negotiations somewhat shifted in their favour.

For many foreign buyers, however, the key point driving them to buck the trend and buy in the uncertain run-up to the referendum does not come from the property market itself. Rather, the main factor at play is one of currency. Against the US dollar, the pound has lost nearly a third of its value since 2008. Recently, it has been particularly volatile and on the whole has seen a comparatively large amount of depreciation, with the Bank of England pointing to the uncertainty surrounding the referendum result as the key cause for this.

Should Britain actually vote to leave the EU, further depreciation of the currency could feature among the economic ramifications of this decision. Major Japanese investment bank Nomura recently predicted that a further 15% drop in the currency's value could result if the British public decides to vote leave.

While the pound has been volatile at best, property prices have continued to rise steadily, particularly in London. While many foreign buyers take the UK economy's uncertain immediate future as a reason to hold off on investment, other, more daring investors have seen an opportunity too tempting to be missed. The depreciation of the pound has made exchange rates more favourable for non-UK-based buyers of UK property investment, and this makes properties effectively more affordable. In a situation where those properties are so far continuing to rise in value despite becoming effectively more affordable when buying with a foreign currency, it is perhaps not especially surprising that some overseas investors are seeing the potential for rewards which justify buying in an uncertain climate.