Market Insight - September 2018
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Sterling's Weakness

Two years since the Brexit vote and currency remains one of the most affected areas of the economy.

Over two years after Britain voted to leave the European Union, the currency market remains one of the most affected areas of the economy. In Q1 2016, the quarter before the Brexit vote, one pound gave you 1.30 euros. Since the vote, the pound has depreciated 12% against the Euro and in Q2 this year, the pound averaged 1.14. However, economic uncertainty has also impacted housing market sentiment more widely.

The weaker pound now means that property in the UK is cheaper in overseas currency, but this varies amongst countries as their own currencies have also moved for varying reasons. Out of a basket of currencies Russian buyers currently have the greatest advantage. A home in the UK cost a Russian buyer 19% less in H1 2018than it did in H1 2016. On a £1millionhome that effectively gives Russian buyers a £187,770 discount compared to if they were buying at the start of 2016.

For an EU buyer, a home that would have cost £1million in H1 2016 now costs £885,450. This means it’s 11%cheaper for an EU buyer to buy a home in the UK now than it was in H12016. US and Chinese buyers have a smaller advantage, with a 4% and 6% respective reduction compared to two years ago. This also means that any existing property owned in the UK by an international buyer has fallen in value when converted back into their local currency.

However, the majority of transactions in the UK are domestic purchases, so the real impact of the Brexit vote on the property market will depend on the overall impact on the wider economy. In H1 2018, international buyers bought just over a third of homes (35%) in London. But the future of the pound will depend on the wider economy, which in turn will be dictated by the course the UK takes following its exit from the EU on 29th March 2019.

 

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