The pound may have rallied following Theresa May’s Brexit speech, but there’s still a huge investment window of opportunity for Singaporeans in Britain.
While the vote for Brexit has caused fluctuations in equities and bond markets, UK real estate continues to go from strength to strength.
And, despite the sterling’s recent biggest single-day rally against the US dollar for nine years, British real estate is currently available at 14% of the cost for Singaporeans than it was just seven months ago.
Sterling’s rise cannot erase the losses it’s suffered over the last few months
On January 17th, UK Prime Minister Theresa May delivered a highly-anticipated speech on Brexit to the press and delegates at Lancaster House in London. She confirmed that the UK will be leaving the single market, and that her final negotiation proposal will be discussed in both Houses of Parliament before she formally triggers Article 50 and begins Britain’s withdrawal from the European Union.
The impact of the speech was notable in financial markets. With some of the uncertainty about the UK’s economic future, that’s been lingering ever since the British electorate voted for Brexit in June’s EU referendum lifted, the pound posted its biggest rise against the dollar since the summer.
Indeed, sterling shot up nearly 3% against the dollar during afternoon trading, hitting $1.2397, its biggest single-day gain against the US dollar since 2008, before trading at $1.2384 at closing time.
However, it’s important to put the rally into a seven-month context.
Against the Singapore dollar, the pound stood at S$1.755 on January 18th. But on June 23rd, when the markets had expected a remain vote by the British people, it closed at S$1.99768.
For Singaporeans, it means UK assets are still 14% more affordable.
Supply and demand fundamentals still key to UK property success
While cooling measures continue to stunt growth in Singapore’s real estate sector, average property prices in the UK rose above £300,000 for the first time at the start of January. Additionally, rents in some parts of the country increased by as much as 6.4% in 2016.
Britain simply doesn’t have enough homes to keep pace with demand. New UK property listings coming onto the market fell by 46.9% in December over the previous month, underlining the significant supply to demand imbalance that the market is enduring.
It’s also the reason why investors are seeing their returns flourish, and why UK property performance is resistance to external economic volatility.
An opportunity to invest in the future
Housebuilding is currently right at the top of the UK’s domestic political agenda for the first time in a generation. But the government is acutely aware that the sustained demand for new property isn’t just restricted to the owner-occupier sector.
An additional 1.8 million households will become private renters by 2025. Not only would this take the total to 7.2 million, but it would mean that one in four UK households will be renting in eight years’ time.
Yet the rise in renting comes as the country’s private rented sector is undergoing a revolution. Tenants no longer want traditional buy-to-let property, homes that were never designed for renters. Similarly, the government wants the sector to move towards a more professional model with greater levels of management and regulation.
The ResPublica think tank supports the claims from many in the UK property industry that 2017 will be the year of build-to-rent. Knight Frank estimates the purpose-built rental market will be worth £50 billion by 2020 and, with the government curbing investment into the buy-to-let through increased taxation, build-to-rent is also the future of UK property investment, as well as rented living in Britain, too.
With the currency window of opportunity that currently presents itself for international investors, should you be considering adding a UK property to your portfolio?
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