On October 4th, the pound dropped to a 31-year low against the dollar. This, of course, following Theresa May’s announcement that she’ll be invoking Article 50 and starting the Brexit process.
Shortly after this, on October 11th, the FTSE 100 hit an all-time high, trading at 7,129.83. What’s going on?
Foreign investors, prompted by the falling value of the pound, have moved in.
Most of the blue-chip companies listed on the FTSE 100 generate most of their revenues overseas, meaning that the index has been amongst the main beneficiaries of the plummeting pound.
It has, in short, never been a better time to secure assets in the UK. Investors are snatching up high returning UK real estate to add to their property portfolios. Construction companies report a 20% increase in interest for property after the Brexit vote, and house price sentiment has recorded its largest surge in 7 years.
These buyers are mainly Chinese cash investors, many of whom are hoping to profit from rental yields in northern cities like Manchester, where rental yields are highest in the UK. Areas undergoing regeneration, with links to good schools and transport networks, are getting the highest levels of attention.
How Brexit Is Affecting UK Property Investment For the Future
The latest UK property market outlook report by M&G Real Estate states that the UK’s property market is in a strong position to withstand short term economic uncertainties, much more so than during the financial crisis.
Lack of supply in many locations keeps occupier markets comfortable. Private rented residential and long lease properties remain attractive for institutional investors and pension funds, whilst a below average rate is holding up rental properties, at least in the short term, in prime locations.
Things are still uncertain, that’s for sure, and adjustments in property pricing are to be expected right now. But all reports remain cautiously optimistic that, despite some wobbles in the short term, property in the UK will remain a compelling asset class in the long term.