Never in the history of the UK property market have we seen such a turnaround in sentiment. In January UK house prices were rising after the Conservative election victory and the expected resolution of the Brexit furore which had been dogging the country for the best part of four years.
Bank of England data has indicated that over 73,000 new mortgages were approved in February – a six year high which is now looking relatively meaningless as an indicator for UK property investment.
March will NOT be reflecting such positive sentiments: according to forecasts from Zoopla, we can expect a 60% decline in residential property sales in the months ahead as the entire UK residential sector goes into deep freeze. For those planning to buy UK property as an investment, especially overseas buyers watching the pound plummet against other currencies, the big question is how to get into this market while it is so cheap?
At the time of writing, the UK is in lockdown with the government advising buyers and sellers to avoid moving. It also means that it is extremely difficult if not impossible to arrange property viewings.
Housing stock still available for property investors
According to life tenancy specialist MacBeale, there is still housing stock available for investors who are looking at houses purely from an investment perspective. However, these are agreed deals which were negotiated prior to the coronavirus arriving in the UK.
Life tenancies are long term investments where the owner of the property is able to acquire it at a considerable discount, but is not able to actually live in it until the life tenant has died or gone into permanent care. They already have considerable discounts attached which are still larger than any discount that could be achieved from the current economic circumstances in the UK.
“All the existing stock price will remain unchanged as the formula for the discount is based on age against open market value,” explains Paul Beale, Director with MacBeale in the UK. “We are already looking to get new property via the secondary market from banks and insurance companies. These won’t be new life tenancies created from the open market, rather they will be existing stock which will be brought back to market.”
Beale thinks that UK house prices are currently holding steady as there are few forced sellers. This may change depending on how long the lockdown continues and its consequent negative impact on the British economy, with knock on impact felt in UK housing prices in Q3-4. With sterling now very weak, however, he reports increased interest in UK property again from overseas buyers, especially from East Asia. “We see this trend continuing,” he adds.
Overseas investors will also be aware that the latest UK budget has introduced a 2% surcharge for foreign buyers of UK property, which will take effect next year. This, coupled with a weaker pounds, is creating a fairly small window of opportunity for anyone living abroad looking at UK residential property as an asset class.