The result of last week’s general election led to the pound falling to an eight-week low and demonstrating once again the vulnerability of Sterling in the current economic climate.
Sterling tumbled around 0.6 per cent to 1.1311 against the euro and 1.2689 against the US dollar after losing around 1.5 per cent on Friday after the UK election ended in hung parliament.
Although the currency recovered once Theresa May announced her intentions of forming a coalition with the Democratic Unionist party (DUP), overseas investors may look to take advantage of the pound’s depreciation value against other major foreign currencies.
Since the vote to leave the European Union, many international property investors have been attracted to the UK property market. This further decline in the pound coupled with a lack of supply and ever-growing demand could encourage further investment.
Hong Kong and China, both corporate individual investors, will remain a magnet for UK property investment despite future uncertainty.
“The worst-case scenario for overseas investors, including from Hong Kong, was a Labour victory,” said George Brock, a political analyst. “Its manifesto promised to raise corporation tax from 19 to 26 per cent. To fund its very ambitious objectives, it would have to raise taxes. The easiest targets are foreigners, the wealthy and property. It could have imposed taxes on second properties and those purchased but left empty.”
“Since Britain is leaving the European Union, it needs foreign investment even more than ever,” said Brock. “China and Hong Kong are important sources of such investment. So Theresa May cannot afford to upset them.
“The UK has many attractions as an investment destination. It has a strong legal system and excellent lawyers which protect your asset. If you buy property in France or Spain, you discover there is a law or regulation you did not know about. London remains a global city that attracts and will continue to attract investment from around the world. You are buying a liquid asset.”
Property has shown for time and again that it will hold and increase its value in the face of political and economic turbulence. This latest general election makes it the third consecutive year where the British public have been required to turn out to the polls, following the EU referendum last year and a General Election in May 2016. The truth is that UK property, once again, is more than likely set to be the constant for those looking for safe haven for their money whether domestic or overseas.