International investors are continuing to drive demand in the UK property market, and the London prime market in particular is performing strongly among cash buyers.
The prime London market is seeing increasing interest from overseas buyers, including US property investors. The latest Prime London Buyer Demand index by Benham and Reeves revealed that buyer demand from international investors has increased by 2.5% during the past quarter.
Attractive areas of outer prime London, such as Richmond and Wimbledon, are historically sought after. But newer core prime London hotspots are also increasing in demand.
The demand from overseas buyers has caused prices to remain relatively resilient. Some international investors are also interested in off-plan or new-build properties that come with potential discounts from developers.
Currently, the UK property market is particularly attractive to US dollar-based buyers and investors as the dollar remains strong by historic standards and the pound remains lower. This means US investors can already secure deals purely based on the favourable exchange rates.
International investors buying properties with cash
There are pockets of strong demand across the UK property market, particularly from cash buyers who are taking advantage of the weaker pound. According to Savills, 70% of central London properties sold this year were bought entirely with cash, and this is increasingly happening with purchases by international investors.
As mortgage rates remain higher than they were a year ago, we could see more buyers and investors who are able to secure properties with cash to do so. On 3 August, the Bank of England increased the base interest rate by 0.25% to 5.25%, which is the 14th consecutive rise to the base rate.
But for international investors, obtaining a foreign national mortgage can be relatively straightforward as there are a greater number of options available nowadays. However, it is advised that buyers use a reputable broker to ensure the process goes smoothly.
Shortage of rental properties as tenant demand rises
A big reason for investing in UK property revolves around the ongoing supply-demand gap across the private rented sector, which is home to around a fifth of the country’s population.
International investors can secure strong rental yields, especially in property investment hotspots. London is often one of the default starting points, but there are other locations seeing strong demand and growth too.
In the capital specifically, only 4% of rental properties are available to rent, which equates to 40,496 homes, according to research by Benham and Reeves. And in certain boroughs, less than 3% of its rental stock is available to rent.
Room for growth in the buy-to-let sector
While this low level of stock is showing some signs of growth, it’s still nearly impossible for some tenants to secure a rental property. This shows the room for growth needed in the private rented sector and the current opportunities within the investment landscape.
Director of Benham and Reeves, Marc von Grundherr, commented: “London may be seeing a subdued rate of growth when it comes to the sales market, but the rental sector has been on fire of late and is buckling under the pressure of huge tenant demand.
“A return to normality has seen increased activity from professional tenants, students and foreign renters, all of which have caused stock levels to plummet, making it extremely difficult for new tenants to find and secure a property.
“As our research shows, stock levels are scarcest across the capital’s more peripheral, affordable boroughs, but even those with the financial clout to rent in prime central London will struggle. In fact, we’re seeing an average of 37 applicants for every available rental property that enters the market.
“The only silver lining is that the total number of homes to let has started to creep up, however, this increase is simply insufficient when it comes to fulfilling the current appetite for London rental properties.”
BuyAssociation has offices in London and Manchester and is experienced in connecting international investors with UK property investment opportunities. Get in touch for more information.
