As there has been an increase in foreign buyers investing in UK property, US investors may prove to have a strong appetite for buying property in the UK.
The latest figures show the US housing market saw the biggest annual drop in house prices since 2012. In March, the median US home price fell by 3.3.% to $400,528, according to research by Redfin.
Elevated mortgages have curtailed buyer demand in the US, while a lack of homes for sale limited purchases. Last month new listings dropped by 23.3% year-on-year to the lowest level on record, aside from the beginning of the pandemic on a seasonally adjusted basis.
In a similar way to the UK market, this likely represents a slowdown in response to external factors like rising mortgage rates and the increasing cost of living leading to affordability restrictions. But it’s not thought that this will lead to a house price crash.
However, for US investors seeking stability abroad, the UK housing sector is proving to be an attractive option. This may particularly be the case as the US market has slowed following the collapse of Silicon Valley Bank, and now another US regional bank, First Republic, is wobbling.
Better value for US investors
One aspect in particular that is attracting US investors to the UK right now is the exchange rate. Research by Benham and Reeves revealed exchange rate fluctuations and a weaker pound compared to the dollar has presented opportunities for US investors to secure savings.
In February 2022, the average UK house price sat at £273,006. This would have required a US buyer to spend $369,459. However, the current increased average house price of £294,329 would see them spend only $355,079. This equates to savings of $14,381 for US investors.
This contributes to a relative price cut for any investment made in the UK, and it will maximise an investor’s returns compared to buying in the US. On top of that, the UK property market has long been viewed as a secure option.
At the same time, there is a greater number of foreign national mortgages available. The UK mortgage market has remained remarkably competitive in light of recent hikes to the Bank of England base rate.
Average interest rates have actually been falling over the past few months. This means buyers from overseas, including US investors, are able to obtain better rates and choose from a wider range of products.
Increasing number of foreign buyers
Additional analysis by Benham & Reeves shows the number of foreign buyers entering the market across the board in England and Wales has increased by 3.2% over the past year. And in some areas, this increase is as high as 18.8%.
The research shows that there are currently 280,021 homes registered to foreign homeowners. Individual homeowners make up 67% of these properties, while 33% are owned by overseas companies.
Marc von Grundherr, director of Benham and Reeves, comments: “With pandemic induced travel restrictions now a distant memory, foreign homebuyers are once again setting their sights on the property market across England and Wales and we’ve seen a consistent increase in demand over the last year.
“We expect the level of foreign interest to continue to climb over the coming year as currently, many overseas buyers are dipping a toe within the rental market to try before they buy, committing to a purchase once they have found the right neighbourhood to suit their individual needs.”
Where are overseas buyers investing?
Regionally, the north west of England has seen the largest increase in the number of foreign buyers in the past year with a 5.4% rise. The West Midlands came in second with a 4.9% increase. This shows that there is a growing trend of overseas buyers not only looking at London but also growing regional areas outside of the south.
Marc von Grundherr adds: “London has traditionally been their destination of choice and the capital still ranks top of the table in terms of the sheer volume of foreign homeowners within the market.
“However, we are also seeing a strong uplift in market activity up and down the nation and there are comparatively very few areas where the level of foreign homeownership has dropped on an annual basis.”
BuyAssociation has been helping international buyers, including US investors, access the UK property market since 2005. Get in touch with our team today to learn about our current investment opportunities and find out how we can help you invest.
