Market Insight April / May 2019
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INTERNATIONAL BUYERS

More than half of homes in prime central London bought by a foreign buyer.

 

Overseas investors are taking advantage of Brexit uncertainty, a stagnant property market and the weak pound to purchase high end homes in Great Britain. The shift in demand from UK buyers to foreign buyers since the EU referendum in 2016 continued, particularly in the capital. 57% of homes bought in prime central London were purchased by an international buyer in H2 2018, the highest level in six years and above the 40% recorded pre-referendum (H2 2015).

House prices, particularly at the top end of the housing market, have been falling for some time, and foreign buyers seem to be making the most of these discounts as the market bumps along the bottom. These discounts, along with the weak sterling, seem to be outweighing Brexit uncertainty when it comes to foreign buyers deciding on where to buy a home. A property that would have cost an EU buyer £1million in H1 2016 effectively cost £124,000 less in H2 2018 due to the sterling’s depreciation alone. This represents a 12% discount, ignoring house price falls in some prime locations, which offer further savings.

Proportion of homes purchased by international buyers 

Source: Hamptons International

In Greater London the proportion of homes bought by an international buyer also rose to the highest level in six years. In H2 2018 foreign buyers bought 36% of homes in Greater London, up from 31% in H2 2017. This proportion is 15% higher than in H2 2015 (pre-referendum) when 21% of homes were purchased by an international buyer. The pickup was caused by a drop off in UK buyers combined with an increase in EU buyers. 14% of homes in Greater London were purchased by EU buyers in H2 2018, up from 8% in H2 2017 and 10% in H2 2015 (pre-EU referendum).

However, it’s not just Prime Central London that international buyers are targeting. 29% of prime homes in the suburbs and super-burbs, including areas such as Richmond, Wimbledon and Hampstead, were purchased by a foreign buyer in H2 2018. This proportion has risen 12% since the EU referendum in June 2016.

Although international buyers are less prominent further outside of the capital and into the country, their levels have also been rising. International buyers purchased 8% of homes in prime country locations last year, up from 6% in 2017.

However the future role of international buyers in the housing market will depend, to a degree, on what form the proposed changes to stamp duty for foreign buyers takes. The government’s proposal of a 1% stamp duty surcharge on top of existing rates is unlikely to dissuade foreign buyers purchasing prime homes in England, but it could impact those purchasing cheaper homes, particularly as investments. Currency movements, uncertainty and future expectations of house price growth are more important factors.

The changing cost of a £1million home (Jan2016 = £1million)

 

Source: Hamptons International & Bank of England

 

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