It’s probably fair to say that the result of the Brexit referendum was badly received by international investors. The pound was hammered in the currency markets and the FTSE sank like a stone in a whirlpool of disbelief and dismay. Panic, however, can only last for so long. Sooner or later, it has to give way to acceptance and a realistic appraisal of the current situation and what it actually means. This appears to have been happening over the course of the last few months and, step by step, it seems like international investors are starting to remember why they liked the UK and to see the post-Brexit landscape as an opportunity.
In the short term
The weakened pound may make it more expensive for people from the UK to go abroad, but it also makes it cheaper for people from overseas to come to the UK whether physically or as investors. The most obvious beneficiaries of this are the UK internal travel industry and the UK property market, in particular the London property investment market. Since it’s anyone’s guess how long the pound will continue to be valued so weakly relatively to other currencies, international investors have an incentive to act now rather than wait.
In the medium term
At the current time, indications are that the UK is going to be in “Brexit limbo” for at least the next two years and the entire process of “unscrambling the eggs” could go on for many years beyond that. It’s therefore entirely possible that potential buyers will hold off during this time until there is clarity on the sort of key issues which influence personal finances, such as access to the single market and freedom of movement. At the same time, sellers may be more open to selling at lower prices to cash purchasers so that they can seal in their equity and give themselves maximum flexibility to respond to any changes brought about by Brexit. This means that London’s ever-buoyant rental market could be boosted still further. Potential rises in interest rates could provide further buying opportunities for those able to pay cash for property.
Over the long term
Indications from the UK government, particularly the last Autumn statement, suggest that their game-plan for the foreseeable future can be summarized as “invest in the UK to attract investment to the UK”. Hence there are a number of infrastructure improvements planned, particularly in the areas of transport and high-speed internet. Putting these together with the fact that the UK’s labour market contains a broad range of workers from unskilled to highly skilled and the fact that the UK’s employment laws offer companies unprecedented flexibility when compared to any other European country and there is cause for optimism regarding the UK’s economy, even in the event of a hard Brexit, which leaves the UK without access to the single market. Although investors may wish to take note of the fact that there is some degree of concern about the level of international property ownership in London, London Mayor Sadiq Khan has indicated his recognition of “the positive role that overseas buyers play in enabling developments to go ahead.”.