Brexit: Will London remain attractive to overseas buyers?
According to independent property buying agency, Black Brick, despite it being impossible to know how the property market would react to a potential exit from the EU, it is likely that London will retain its attractiveness to wealthy international buyers regardless.
Furthermore, Black Brick notes a rush of buy-to-let investors wishing to complete before April 1st but advises them to weigh up the costs and benefits of trying to rush through deals this late in the day as prices may soften post-April.
Camilla Dell, Managing Partner at Black Brick, comments: “One immediate impact of the prospect of a Brexit has been to hit sterling; between the end of 2015 and late February, UK currency lost 6% against the dollar and, over 18 months, the currency has slid almost 20% against the greenback. This serves to make UK property more attractive to dollar-based buyers; as is so often the case, opportunity is the other side of the coin to crisis and, if you add currency moves to the 7-7.5% falls we've seen in prices in Knightsbridge, for example, then prices are more than a quarter lower in dollar terms than they were 18 months ago. It's certainly tempting some overseas buyers back into the market.
London is going to retain its attractiveness to wealthy international buyers regardless of whether the UK remains in the EU; its cultural attractions, geographic location, legal system, and concentration of talent mean that there will always be demand for prime central London property.
We also note that, with just weeks to go before the introduction of a 3% hike in stamp duty payable on buy-to-let and second home acquisitions, as predicted, there is a rush among buyers to complete transactions before 1st April.
Certainly, for buyers who have had offers accepted, or who have exchanged, there's still time – and obvious motivation – to get deals signed and sealed before the tax rise.
However, we should sound a note of warning; for those clients yet to find the right buy-to-let investment, they should weigh up the costs and benefits of trying to rush through deals this late in the day. We have seen cases of vendors seeking premiums in exchange for getting transactions done before 1st April – premiums that, in some cases, substantially erode the tax benefit involved.
It's also worth bearing in mind that, as with previous increases in stamp duty, we expect this latest rise will feed through into asking prices and would expect prices for buy-to-let properties to soften after 1st April, as vendors' expectations align themselves with the yields demanded by investors.”