The level of foreign investment in UK housing has faltered in recent years, but London property could be seeing a revival of interest now the dust has settled.
A combination of the UK’s 2016 vote to leave the EU, a new stamp duty levy and finally travel as well as financial issues caused by Covid have all had an impact on foreign investment.
The London property market, which was once one of the main attractions for overseas buyers, appeared to have fallen slightly out of favour. While the UK property market has remained robust over a tumultuous few years, some of the issues above dampened appetite in some areas.
According to new research from debt advisory specialist Henry Dannell, though, the tide could now be turning. After a steady decline in transaction numbers since 2017, foreign buyer appetite seems to be returning.
Highs and lows
The company noted that 2017 was a stellar year for overseas investment in London property, when there was “phenomenal interest” from this buyer group. The quantity of transactions – 31,693 – was the highest the country had seen in the past decade, marking a 21% annual increase from 2016.
The value was also the highest seen over the previous 10 years, at £15.2bn, and was a 24.3% increase compared with 2016. But the peak was followed by a trough, notes the company, with foreign buyer numbers dropping by -0.7% in 2018 and by -26% in 2019.
This was the year that the effects of Brexit were about to become apparent, as the UK officially left the European Union on 31st January 2020. This was, unbeknown to anyone, just a couple of months before the effects of Covid-19 began to take hold, too.
The year of 2020 then saw another decline in foreign investment into London property of -3.6%. This equated to approximately 22,444 transactions, at a value of around £10.9bn; still relatively high due to the ongoing capital appreciation of UK property.
Geoff Garrett, director of Henry Dannell, said: “Having peaked in 2017, a myriad of factors have led to a decline in international buyer interest within the London property market. As a result, both the proportion of transactions and the total market value of homes purchased by foreign buyers have been on the slide.”
A turnaround for London property
As the country slowly began to see some level of recovery from the Covid pandemic in 2021, Henry Dannell noted that international interest began to return. There was a 0.6% increase in property purchases, while market value rose by 4.8% to almost £11.4bn.
During the course of the pandemic, as well as Brexit, the UK property market has shown its resilience, and buyer appetite has not gone away. This ongoing confidence in bricks and mortar in the country may have instilled optimism in overseas buyers, even despite the 2% stamp duty surcharge.
Garrett said: “This tide certainly seems to be turning and the initial green shoots of a recovery across this segment of the market appear to have sprung in 2021. This has undoubtedly been driven by the easing of pandemic travel restrictions and the fact that the political dust has now settled following Brexit.”
He added that they expect recovery to continue over the coming year.
“With many foreign buyers already securing financial support within their native countries, often at much higher rates of interest compared to the UK, we don’t foresee increasing interest rates to act as a deterrent to the same degree as it will across the domestic market.”
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