Kuala Lumpur, March 24 - The United Kingdom will continue to face uncertainties once Article 50 is invoked, but opportunities lie ahead for foreign property investors.
It is reported that the Prime Minister Theresa May will trigger Article 50 next week.
“The pound fell to a 31-year against the American dollar since the EU Referendum, and took yet another beating when the UK Parliament passed the bill for Brexit this week. Comparatively, the fall of the pound is more drastic compared to the ringgit. House prices have taken a dip, particularly in London, and the combination of the two factors presents a good buying opportunity for Malaysian and other foreign investors looking to invest in UK property,” says CSI Properties (Cornerstone International) spokesperson Virata Thaivasigamony.
However, Virata mentioned that the window of opportunity for a favourable exchange rate may be a short one, citing predictions by the Bank of America.
“The Bank of America has advised clients that it expects the pound to suffer only one more plunge, which will be its lowest, when Article 50 is invoked. The UK will be ‘on sale’ again. This will be the best time to take advantage of the pound as the currency will strengthen once official Brexit negotiations get underway.”
Virata added that more Malaysian investors are seeing the opportunity that Brexit presented, understanding that while there may be uncertainties ahead, UK’s fundamentals are strong enough to ride out the Brexit process.
CSI Properties has seen a 60% increase in sales volumes in 2016 compared to 2015, more than half of which are from UK real estate – an indication that Malaysian investors are taking advantage of the current favourable exchange rate following Brexit.
Additionally, more than 65% of the agency’s UK real estate sales came from UK student property alone. The UK student accommodation sector has grown by 37% since 2014, from £30.9bn to £42.5bn, making it one of the fastest growing asset classes in the UK property market.
Yet, supply is still unable to keep up with demand. Knight Frank has predicted that UK’s purpose built student accommodation sector is set to reach a total value of £45.8bn by September 2017.
Asian institutional investors like Mapletree Investments and GIC from Singapore have invested heftily in UK student property, with GIC’s most recent venture with Unite Plc in UK student housing costing the sovereign wealth fund a staggering £227m.
“Opportunity also lies in the fact that the UK is beleaguered by insufficient housing, which is fueling demand and driving up prices. Studies show that the UK needs 250,000 to 300,000 built every year, but latest figures reveal that this target has consistently not been met; as an example, only 190,000 homes were added to England’s housing stock last year. Undersupply and inaccessible house prices will significantly increase the community of renters in the UK.
“The UK (and London) will go through momentary upheaval and uncertainty, but it will right itself around and be resilient in only a matter of time. Once that happens, the pound will be stronger than ever and prices are going to go up again,” said Virata.
Recently, notable institutions involved in UK property investments include Lembaga Tabung Haji which has allocated RM2 billion for real estate investments in the UK and Australia, while GuocoLand has expanded its portfolio to UK and Australian markets through a strategic 27% stake in Eco World International.