Predictions of double-digit house price falls should not deter expatriate investors from the UK’s property market which still presents opportunities despite rising interest rates.
The Bank of England raised the base rate by 0.75 percentage points to 3 per cent at its meeting on Thursday.
This may at first sight suggest it is not the best time to invest for expatriates.
But other dynamics in the market, such as the weak pound and a predicted fall in prices, still make it attractive, according to experts.
“While [another] rise in Britain’s interest rate — the eighth since December last year as the Bank of England strives to contain runaway inflation — might not seem like good news for expatriates with an outstanding mortgage on a UK property, increasing borrowing costs can also present some opportunities,” said Alice Haine, personal finance analyst at Bestinvest, the DIY investment platform and coaching service.
The cost-of-living crisis, driven by inflation and soaring interest rates, is expected to precipitate a “significant” fall in house prices next year.
“House prices are expected to drop significantly next year following more than two years of bumper growth, with some anticipating a double-digit drop as the squeeze on domestic spending power tightens even further,” said Ms Haine.
Savills is predicting an average fall in prices of 10 per cent, but they could slump as much as 12.5 per cent in London and 11 per cent in the south-east and east of England.
Lender Nationwide has warned they could fall as much as 30 per cent in a “worst-case scenario”. It believes a fall of 8 to 10 per cent is more likely, however.
Experts have said the crisis for the pound is now over, having recovered somewhat from its record low below $1.04 on September following the destabilising mini-budget. But it remains about 15 per cent down year-to-date. And analysts are predicting further weakness ahead over the next 12 months.
Deutsche Bank vice president and FX strategist Shreyas Gopal said: “The UK’s external financing needs remain large and, on current market pricing, real yields are still too low compared to other major currencies. As long as the global risk environment remains weak this leaves the pound vulnerable and the likely trend lower.”
That presents opportunities for expatriates who are paid in currencies pegged to the dollar, like the Emirati dirham.
“A weaker pound means their income will stretch much further, so now might be a good time to overpay on a mortgage to reduce the monthly repayments ahead of a fixed-rate deal expiring,” said Ms Haine.
“While prices are already on the turn, with a drop of almost 1 per cent in October compared to the previous month and slowing annual growth, the market will quickly switch to a buyers’ market as domestic buyers retreat amid higher living and borrowing costs, leaving a window for UK expatriates and foreign national buyers to swoop in,” she said.
Prime central London homes at bargain-basement prices post-Brexit — in pictures
The weaker pound increases expatriate deposits and buying power, with cash-rich buyers in the strongest position as they can snap up deals very quickly, said Ms Haine.
“First-time buyers will benefit even more because of the reduced stamp duty land tax charges outlined by former chancellor Kwasi Kwarteng in September, with no levy liable on the first £250,000 (£286,883) of the purchase price — softening the blow of the 2 per cent surcharge for overseas investors imposed last year.
“Beware, however, this measure may get ditched in the November 17 budget by Chancellor Jeremy Hunt in his bid to balance the books, so don’t rely on that staying in place.”
“However, waiting a few months for the market to fall further, as the myriad of local and global challenges facing the UK economy lead to more distressed sales, might be wise for those looking to secure a killer deal.”
So, if you do decide to buy, where should you look?
According to Savills, the prime property market, which represents the top 10 per cent of property by value, may prove more resilient, due to its lack of reliance on mortgages and more foreign buyers capitalising on the weak pound.
Prices are expected to fall by 7 per cent in prime outer London and just 2 per cent in prime central London, it says.
“The rarefied market in central London’s top postcodes continues to look good value in historical terms, particularly when seen in the context of the weaker sterling and strong dollar,” Frances McDonald, a Savills research analyst told The Times.
According to CMC Markets, an online trading platform, Waltham Forest in London has seen the biggest increase in prices over the last decade, of 113.6 per cent.
Thanet in Kent posted the second biggest rise, followed by Barking and Dagenham in third place, and then Hastings in East Sussex, according to analysis of Office for National Statistics data.
Hackney in London came in fifth place.
Other areas may represent more of a bargain for expat investors.
The city of Aberdeen in Scotland is reportedly the only place in the UK to have registered a fall in prices over the past 10 years.
In 2012, the average house price in the city, where prices are tied to the fortunes of the oil industry, stood at £160,525, but it is now £144,614, representing a fall of almost 10 per cent.
ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
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Auron Mein Kahan Dum Tha
Starring: Ajay Devgn, Tabu, Shantanu Maheshwari, Jimmy Shergill, Saiee Manjrekar
Director: Neeraj Pandey
Rating: 2.5/5
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Race 3
Produced: Salman Khan Films and Tips Films
Director: Remo D’Souza
Cast: Salman Khan, Anil Kapoor, Jacqueline Fernandez, Bobby Deol, Daisy Shah, Saqib Salem
Rating: 2.5 stars
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How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
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ASHES SCHEDULE
First Test
November 23-27 (The Gabba, Brisbane)
Second Test
December 2-6 (Adelaide Oval, Adelaide)
Third Test
December 14-18 (Waca Ground, Perth)
Fourth Test
December 26-30 (Melbourne Cricket Ground, Melbourne)
Fifth Test
January 4-8, 2018 (Sydney Cricket Ground, Sydney)
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Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
Notable groups (UAE time)
Jordan Spieth, Si Woo Kim, Henrik Stenson (12.47pm)
Justin Thomas, Justin Rose, Louis Oosthuizen (12.58pm)
Hideki Matsuyama, Brooks Koepka, Tommy Fleetwood (1.09pm)
Sergio Garcia, Jason Day, Zach Johnson (4.04pm)
Rickie Fowler, Paul Casey, Adam Scott (4.26pm)
Dustin Johnson, Charl Schwartzel, Rory McIlroy (5.48pm)
More from Neighbourhood Watch:
The five pillars of Islam
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
New Zealand 21 British & Irish Lions 24
New Zealand
Penalties: Barrett (7)
British & Irish Lions
Tries: Faletau, Murray
Penalties: Farrell (4)
Conversions: Farrell
Afghanistan fixtures
- v Australia, today
- v Sri Lanka, Tuesday
- v New Zealand, Saturday,
- v South Africa, June 15
- v England, June 18
- v India, June 22
- v Bangladesh, June 24
- v Pakistan, June 29
- v West Indies, July 4
The biog
Age: 23
Occupation: Founder of the Studio, formerly an analyst at Cleveland Clinic Abu Dhabi
Education: Bachelor of science in industrial engineering
Favourite hobby: playing the piano
Favourite quote: "There is a key to every door and a dawn to every dark night"
Family: Married and with a daughter
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