Is now the right time to buy property in Britain?
The value of British assets fell after pound hit a record low, which tempts foreign investors to buy financial assets, hoping to reclaim its value later, but is it the right time to buy a property in Britain?
One of the most important assets that foreign investors consider worthy of placing their wealth in as more stable and assured to increase value in the long term is real estate assets.
With the turmoil and uncertainty about the future of the pound exchange rate, high interest rates and the prospect of a downward revision of the credit rating of Britain’s sovereign debt, overseas and British buyers are facing the difficult question, “Is it a proper time to buy a house now?”
The answer to this question varies based on whether the investor is a foreigner and therefore saving his wealth in foreign currencies, or if he is British and saves his money in pound.
It also depends on the way of purchasing, for example, whether the purchaser wants to pay in cash for the property, through a mortgage loan as is normal for citizens in the UK, in addition to the purpose of the purchasing whether it’s for housing, renting or for saving the asset in a long-term investment.
And even though the British property market is one of the most stable in the world, because most Britons own their homes, the current turmoil due to Prime Minister Liz Terrace’s fiscal and monetary policy makes it extremely difficult to anticipate future market performance.
foreign investors can buy cheaper property in Britain, while the pound slumps further
British financial assets value has started to plummet since Brexit referendum held in 2016.
More investors from abroad were expected to buy more financial assets in Britain, including homes and real estate, but what happened was quite the opposite.
Some attributes this to the pandemic. And to the Russian war invastion for Ukraine, because sanctions on Russia have raised concerns among Asian investors about depositing their wealth in Western countries, including Britain. (Atticsandmore.com)
However, there are structural reasons that led to the decline in foreign investors’ interest in the British real estate sector, including the world’s loss of confidence in British economic policy, especially after the economic policy statement of Liz truss government, and The tax cuts announced by the Chancellor.
So if your saving your money by dollar or euro or any other currency linked to the dollar such as the currencies of the Arab Gulf countries, it is tempting to buy a property in Britain now with the fall in the pound’s exchange rate, yet you have to take into account a number of things, including:
Market estimates that the pound will continue to fall to par with the dollar and perhaps below the dollar, therefore it may be better to wait until the beginning of next year to seize better real estate opportunities at a lower cost.
as the Increased interest rates and continued high inflation could lead to a real estate market crisis that will plummet home and commercial real estate prices, therefore buying opportunities could be more affordable in the coming spring, and If the market did not collapse, real estate prices will fall somehow as a result of increased demand over supply.
However, If the investment period is short (from two to five years), it is necessary to think about the future value of the assets in Britain, and nowadays It is estimated that market turmoil persists and therefore the effectiveness of investment is not guaranteed, and pound may continue to fluctuate for a long time, which means that the market will continue to weaken if investment in real estate needs to be liquidated.
Of course, there are other factors related to foreign investors’ depositing their money in Britain, whether in real estate or other assets, and most of these factors won’t be clear before the general election in early 2024, and the results and formation of a new government.
It all seems more complicated for Britons wanting to buy a house now, and despite the temporary cut of stamp tax, announced in Friday’s budget to refresh the real estate market that is expected to be turbulent in the light of higher interest rates and higher inflation rates, but that was not enough to reassure citizens.
As soon as the markets began selling GBP heavily since Friday, lenders, including HSBC, Halifax and Santander, suspended new deals for up to a week as they attempt to reprice them.
Markets were estimating a rise in Britain’s interest rate to about five percent by next May, before the recent fall of pound and the issuing of more sovereign debt bonds.
However, Bank of England may have to increase interest rate sharply to seven percent or more by April.
And Thus, if the buyer received fixed-rate mortgage, with an advance fee for two, three or five years, he would avoid paying a higher variable interest rate during that period.
But now that lenders suspended new deals for up to week, they are expected to reprice mortgages at higher interest rate, however, many lenders and banks announced that it’s difficult to estimate the interest rate while 8.3 million households in Britain will almost certainly face a significant increase in monthly mortgage installments on their homes.
However, the market estimates that the turmoil would lead to a significant fall in properties and homes prices in the coming months, and that might continue until the first months of the nest year. If the pound keeps descending, while interest rate is increasing which would deepen the recession.
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