Overseas investors in UK property ease the pressure of Brexit woes

Published on 24th September 2019 by Laura West

Amid the anxiety created by Brexit, sentiment from overseas investors has somewhat cooled towards the property market in the UK. Undoubtedly, many investors are biding their time before making serious investments in the UK market, and while Brexit uncertainty persists, this will likely remain the case.

However, those who are still choosing to invest in the property market in the UK are tending to choose pan-European funds, where the UK represents just one part of the market. Investors are tending to favour diversity now, across many different geographical locations, and avoiding sole exposure in the UK while Britain’s future outside the European Union remains unknown.

A number of specialist UK managers have merged with their European counterparts or exited the market altogether.

Some investors may think that this retreat from the investment market in the UK represents a lack of opportunities. However, in reality, it actually reflects the opposite. European funds may play an important role, but local UK managers are particularly well placed to identify any opportunities that may arise in this Brexit environment. Investors with a diluted focus on the British market may lose out on the prime opportunities for investment in the UK.

There has been much fear over the state of the property market in London due to the uncertainty surrounding the financial services sector, which is the city’s dominant market. However, this caution does not reflect the current opportunities that are available. The rental market continues to remain stable and active, with the dynamics of supply and demand ensuring that rental values are likely to steadily grow.

Although some investors may be scared by Brexit, investments in UK property are still delivering good returns for investors. UK property managers have acquired the necessary expertise and knowledge, as well as tools such as property management software in the UK, to find investment opportunities despite the uncertainty.

Investors from overseas are also increasingly choosing to invest in regions where sole UK managers likely have an advantage. There is a well documented divergence between regional and London property markets, but this is less documented in the commercial markets. This reveals exceptional opportunities for investment.

In the event of the UK exiting the European Union without a deal, London will be adversely affected by costs in business reviews and financial services companies could potentially leave the capital. However, support from the government for regions would help keep property values stable, and encourage overseas investors to choose to invest in these areas, to some extent.

Regions across the UK have vibrant and growing business communities, with large populations of students providing high numbers of human capital, while infrastructure projects such as HS2 attract even more businesses. Niche markets such as healthcare property and student housing are likely to hold their value.

The trend for companies setting up new headquarters in cities outside London continues to grow. For example, Channel 4 has set up its HQ office in Leeds, and managers across the UK are gaining access to unique opportunities and the best deals.

In the longer term there are huge upwards trends for property, despite a possible fall in the shorter term. Large cities, including London, will always experience longer term rises in property prices due to the appeal for city living, lifestyle and work opportunities. Despite any short term dips in value, a wise investor can rise above this panic and be in the right position to buy well in the market. Purchasing property in the capital at a good price can be tough, but falling prices could open the market up for investors with a cool head.

For now, we can only estimate how this will unravel. However, it is certain that in 2019, there will be challenges to face and a great deal of change, but also many opportunities for investment in property during Brexit.

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