Price falls and exchange rates- the perfect opportunity for overseas buyers?

The following is a research note that was published by Lonres recently which I thought you might find interesting:

While many strive to buy at the bottom of the market, few can accurately predict when that will be. However, a combination of price falls and a weaker sterling could mean the next few months represent one of the most lucrative opportunities for overseas buyers for some time.

For those looking to purchase in prime central London in sterling, prices are, on average, 10% lower than they were at the peak in 2014. However, it is those buying with other currencies who could benefit from even greater savings.

Buying with US dollars

Buyers looking to purchase in US dollars, or dollar-pegged currencies such as the Hong Kong or Singapore dollar, will find central London is now significantly cheaper than at the peak of the market two years ago.

Alongside price falls, recent changes in the value of the pound have had a significant impact on the cost of prime central London property for dollar buyers. Average values paid in US dollars per square foot have dropped by 29%, from US$3,149 at the peak in 2014 to US$2,238 in August this year – making prime central London, for those buying in US dollars, the most affordable it has been since 2012.

We found forecasts vary on the performance of the dollar against sterling for the rest of the year. The most pessimistic suggesting that by the end of 2016 the pound could be worth as little as US$1.15, with other forecasters expecting as high as US$1.29. If values hit US$1.15 to the pound, prices in prime central London could be 37% below the 2014 peak, but for those buying with sterling, values would have to return to 2009 levels before they saw similar savings.buying-in-us-dollars-2

Buying with euros

Despite the vote to leave also impacting the performance of the euro on the global currency market, there are still significant savings to be had for those looking to buy with euros in central London.

Price falls and a weaker sterling have meant the amount paid per square foot in euros, in prime central London, has dropped by 26%, from €2,684 per square foot at the peak in July 2015 to €1,997 in August this year.

As with performance against the dollar, forecasts for the strength of sterling against the euro vary for the remainder of the year. Some forecasters suggest that by the end of 2016 the pound could be worth as little as €1.11, with other forecasters expecting €1.16 to the pound by December.

As with dollar-pegged currencies, exchange rate fluctuations will, we expect, create far greater buying opportunities for prime central London property than changes in prices.

If the euro reaches €1.11 to the pound, prices in prime central London could be 29% cheaper than the 2015 peak. In contrast, for sterling buyers values would have to return to 2010 levels before they saw similar savings.