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UK residential property has long been a favourite for Middle East investors. Now with Sterling remaining at historically low levels in the wake of Britain's vote to leave the EU, many are taking the opportunity to build a portfolio at a saving of over 10%.
Property agents are reporting a surge in sales to investors from UAE, Qatar, Bahrain, Saudi Arabia and other Middle East and North African states with currencies pegged to the dollar. However interest is moving away from the central London hotspots to Northern cities such as Manchester and Liverpool where yields are higher and there is greater potential for capital growth.
Matthew Lavin of Benoit Properties International says the phones started to ring in the days after the 23 June referendum. The pound, which had reached $1.5 the day before the referendum, fell to $1.31 the day after - a 31-year low against the dollar.
"In the weekend after the Brexit vote we sold six apartments in The Exchange Building in Liverpool to a group of Saudi buyers who had seen the news about the falling pound," he says. "They saved around $130,000 collectively compared to what they would have spent two days before. They are now looking to purchase 60 more in the North West over the coming months.
"Investors still see the UK as a secure place to invest capital for long-term income and growth and the added value presented by a weak pound is an added bonus. However they are looking outside London. Cities such as Manchester, Leeds and Liverpool in the so-called 'Northern Powerhouse' are enjoying a resurgence and are amongst the areas with greatest demand for housing. The new high quality private rental schemes currently under construction offer overseas investors a chance to buy in, effectively at discount rates."
Recent figures that home ownership in England has fallen to its lowest level in 30 years with the greatest falls being in areas of the North. While home ownership reached over 70% at its peak in 2003, it is now down to 63% nationally, while in Greater Manchester - which saw the biggest drop - it has fallen to 58%. Residents in Greater Manchester today are no more likely to own a home than those in outer London.
Meanwhile the private rental sector has expanded. In Greater Manchester, 20 per cent of households now rent privately - more than three times as many as in 2003. In England as a whole, private renters have risen from 11% to 19% in the same period. Demand has driven up rents, which increased by 2.4% in the year to the end of June 2016, according to the figures from the Office of National Statistics.
Experts agree that rising prices are driven by a shortage of stock. The UK needs to build around 300,000 new homes a year but the numbers fall well short. Just 171,000 new homes were completed in the year to the end of March 2015.
Now far from reducing demand, the Brexit vote threatens to exacerbate the shortage as the fall in Sterling increases the cost of imported materials. In the longer term, there are likely to be restrictions on migrant labour, on which the construction industry relies. While the government policy was committed to supporting home ownership, this week the new housing minister Gavin Barwell indicated that it was shifting the focus to supporting the private rental sector.
Matthew Lavin adds: "While the UK market may not be as favourable for domestic buyers, the fundamentals remain strong and demand will continue to outstrip supply. The private rented sector has been swelled by the addition of 1.98 million households over the past decade and the signs are that is set for further expansion. For buy-to-let investors, the UK remains a sound, long-term investment."
Benoit Properties current portfolio includes the historic Houldsworth Street building in Manchester's trendy Northern Quarter, where studios start at £118,000 and offering a typical yield of 6.5% over four years; and Exchange Quay, an iconic development on Liverpool's UNESCO World Heritage waterfront site, where studios start at £88,000 with yields of around 7%.
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Benoit Properties International
Established in 2005, Benoit Properties provides selected buy-to-let properties to clients worldwide through its dedicated offices in the UK and USA. Benoit simplifies the task of property acquisition providing everything from property sourcing and consultation, right through to completion and effective ongoing rental management of your assets. Since its inception, it has facilitated over $300 million worth of real estate transactions and has helped thousands of clients acquire property safely, smoothly and successfully. For further information see www.benoitproperties.com
© Press Release 2016
