Overseas investment in the UK could increase as the economic picture looks more positive, providing confidence in the property market.
Recently, the global economy has been resilient. This is despite central banks hiking interest rates with aims to restore price stability. Growth is holding steady as inflation is returning to target levels in a number of leading countries, which could increase overseas investment.
The latest projections from the International Monetary Fund’s (IMF) World Economic Outlook shows economic growth for 2024, and 2025 is expected to hold steady at around 3.2%. Median headline inflation is forecast to decline from 2.8% at the end of 2024 and 2.4% at the end of 2025.
US economic picture
The IMF forecasts the US economy to expand 2.7% this year, which is double the rate of any G7 nation, and 1.9% in 2025. In April, the US inflation rate fell from 3.5% to 3.4%, which is down from its 40-year peak of 9.1% in June 2022.
US GDP has been increasing over the past few years except a brief contraction in 2022, which was not considered a recession according to the National Bureau of Economic Research. The only recent recession for the US was early on in the COVID-19 pandemic, and since that time in 2020, the economy has grown significantly.
Additionally, unemployment has been at historic lows, wages have been increasing and consumer spending has been strong. However, it’s been a bumpy road to recovery. This has largely been due to rising interest rates and increasing inflation.
Recently, Federal Reserve officials have indicated interest rates will remain elevated for the near future. While inflation has eased since its peak, it still remains above the Fed’s target of 2%.
At the same time, research by Redfin revealed elevated mortgage rates are curbing buyer demand in the US housing market. Despite that, house prices continue their ascent as there aren’t enough homes for sale.
Positive growth in UK economy
The UK economy is also showing signs of improvement and is now growing joint fastest in the G7. Its growth is equal with Canada and is outpacing the United States, Japan, Italy, Germany and France.
In the UK, the economy and property market have proven remarkably resilient. Stronger than anticipated growth at the start of 2024 saw the UK emerge from recession.
Inflation has dropped to 2.3% in the year to April, according to the Office for National Statistics, and this figure is down from 3.2% in March. The rate of inflation is now at its lowest level in nearly three years, which will likely impact overseas investment.
Additionally, the UK annual rate of inflation is now just shy of the Bank of England’s 2% target. But as it’s still not there yet, the Bank’s Monetary Policy Committee has kept the base rate at 5.25% for the ninth consecutive time with the next rate setting meeting on 20th June.
Largely thanks to an improved economic outlook, UK house prices have seen a major turnaround. Savills is predicting house prices to increase by an average of 2.5% by the end of 2024. There has also been healthy growth in transaction levels and prospective buyer numbers.
Overseas investment in UK property
Overseas investors have been continuing to eye up the UK housing market. In recent years in particular, the UK has shown its resilience amidst economic and political uncertainty. And many have found the overseas investment landscape to be especially lucrative.
Favourable exchange rates have also made it cheaper for many foreign buyers, including US investors as the dollar has been strong against the pound. Investors from the US have even become one of the most prominent overseas buyers in the UK.
As the UK housing market continues to have good long-term prospects, US investors are expected to continue to have confidence in overseas investment within the UK.
With numerous years of experience in helping with overseas investment, BuyAssociation is a property investment consultancy specialising in helping buyers access the UK housing market. Get in touch with our team to learn about our current property investment opportunities.
