Following on from the hesitance of the pre-Brexit portion of 2016, the UK market now seems as active as ever, but what are the driversbehind the recent upturn?
Unquestionably the biggest contributor has been the drop in the value of the pound to unprecedented lows versus the Hong Kong Dollar; at the time of writing a rate of HK$9.48 to the pound represents a ‘saving’ of over 20% compared with an historical 10 year average HK$12.85.
However, it’s not just the post-Brexit devaluation of Sterling which is contributing to this change, there is also the strengthening of the US Dollar to account for, something which has become apparent as the US economy finally seems to have turned the corner, and a series of interest rate rises look almost certain this year. This is creating highly favourable conditions for Hong Kong-based investors in UK property.
Purely on a currency basis it’s an attractive time for those holding dollar denominated savings to invest in the UK, assuming they have a positive view on Sterling in the longer term, a feeling which, in my experience, is not uncommon among HK investors.
In addition to favourable currency terms, we also need to consider what’s happening in the local housing market within the UK and, in particular, London. Sales volumes in prime London have unquestionably been reduced since late 2015 following the revision of SDLT(Stamp Duty and Land Tax) rates, with market growth also slowing to a roughly static state. In Greater London and the UK in general, both volumes and growth remain largely positive as the market has entered a stage of normality following the upturns of previous years.
This normalized market is helping to create opportunity for cash-rich off-shore investors, not just those from Hong Kong, who are able to deploy savings enhanced by forex gains, but also in part because of the greater flexibility of sellers keen to attract purchasers from beyond the UK to make up for the slowing local market.
One of the questions I’m most often asked must surely be “is now a good time to invest?”, and for me the market factors above would indicate that it is for many in Hong Kong, particularly those with a positive long term view of the UK from both a currency and a housing market perspective.
Time and time again, the London housing market has shown it’s resilience and it continues to do so right now; in the face of multiple challenges and political uncertainty, the housing market remains stable and strong, and many anticipate further growth once the UK surmounts the hurdles it currently faces in leaving the EU.
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Important though these variables are, however, one factor remains more important than ever and that is choosing the right property for your goals. Currently we’re seeing a flight to quality from Hong Kong investors as they look to stable prime assets which they feel secure using as a means of long term investment. In addition to this, we see canny investors looking to “hot-spots” for growth, areas which have seen or will see significant investment in transport, infrastructure, commercial or retail space.
There is no “one solution fits all” model, and in the short term the market alone isn’t going to be enough to significantly bolster values.
So, as always, it’s a case of buying the right property, in the right location and at the right time.
This article was first published in The Standard on 10 March 2017.
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