Investors from the US have been spotting investment opportunities in the UK property market, as US housing value plummets by US$2.3trn.
The latest figures posted on the US housing sector at the end of 2022 show a 4.9% decline in the average value of a home in the states during the second half of the year. This is the biggest fall the market has seen since 2008, when average house prices dropped by 5.8% in H2.
However, the US housing market, like in the UK, has also experienced a ramping up of prices prior to this decline. As Redfin, which conducted the research, points out, home values hit a peak of $47.7trn in June 2022, and the year-on-year results between December 2021 and December 2022 still show a 6.5% increase.
In a similar way to the UK, this likely represents a slowdown in skyrocketing values in response to external factors such as rising mortgage rates and the expanding cost of living leading to affordability restrictions, rather than a crash. Yet for those seeking stability outside the US housing space, the UK is an attractive option.
Long-term diversification into UK
The UK housing market is vastly different in many ways than the US housing space, mainly down to the sheer scale of the US in comparison to the UK. Surprisingly for some US investors, though, the UK property sector can be hugely varied across the different regions, towns and cities, and returns can also be very changeable.
One very important aspect that is attracting US investors to the UK at the moment is the exchange rate. The pound remains relatively weak against the dollar, contributing to a relative price cut for any investment made in the country – and this will maximise an investor’s returns compared with buying US housing.
It can mean double-digit discounts, and for investors seeking a market that is stabilising rather than falling, UK bricks and mortar has long since been seen as a secure option.
Major UK estate agency Knight Frank has reported a rise in the level of buyer interest from the US, with investors particularly attracted by the sector’s long-term appeal.
Paddy Dring, global head of Prime Sales at Knight Frank, said: “We’ve seen a steady increase from Americans. There are those who are forwarding their plans, and will use this opportunity for their longer-term investment plans to diversify abroad.”
But many US investors do have a particular link or motivation to invest in UK property, rather than just attempting to make a profit outside their home country. Dring adds: “We don’t see much pure speculation. The buyers are usually driven by a business or education or lifestyle.”
US housing from San Francisco to Florida
The US housing market is vast and varied, as Redfin’s data highlights. While some areas are beginning to see real downturns in their home values, others are bucking the trend and recording huge gains, despite the overall drop across the country.
Two of the biggest major cities to experience significant property value falls were also two of the most expensive places – San Francisco and New York. In San Francisco, for example, prices fell by 6.7% between December 2021 and December 2022.
The likes of Oakland and San Jose also saw their property markets lose 4.5% and 3.2% respectively over the time period. Meanwhile, in Miami, the value is relatively unchanged.
Yet in Florida, property prices continued to climb over the second half of 2022, along with the states of Tennessee and South Carolina. Parts of these states saw values soar by more than 17% by the end of 2022.
Elena Fleck, a Redfin real estate agent in Palm Beach, Florida, said: “Florida’s housing market is being sustained by folks moving in from the north and, as of recently, the West Coast.”
If you’re a US property investor looking for an opportunity in the UK housing market, get in touch with our team today to find out how we can help you invest.
