Why now is the time for Europe to invest in the UK
As the threat of a no-deal Brexit begins to decrease, the pound is experiencing a resurgence compared to its G-10 peers. With the sterling strengthening for five straight weeks following on from the landmark defeat of the PM’s Brexit plans, it reached highs of 1.1579 as of February 2019.
Although the market continues to fluctuate with the uncertainty of Brexit, Goldman Sachs believes the pound will be the highest-performing G-10 exchange rate this year. Similarly, Bloomberg’s survey of economists and strategists forecast an appreciation of more than 5 per cent.
This comes at a time when the UK market has been identified as a strong contender for Europe’s leading investment target during 2019. Sterling is currently outperforming the Swiss Franc, a currency that is a major indicator of Europe’s wider economic performance. The Franc has hit a new low in ten weeks, under pressure from weak economic forecasts and the UK – EU relationship. With Swiss investors able to get more for their money via foreign exchange, Swiss property investment is able to take advantage of a rising UK market
A recent survey by Knight Frank has shown that of 155 leading property investors, 21% have the UK as their preferred investment market, nearly double the number from the year before.
This is excellent news for a market that remains robust despite political upheaval over the last two years. Uncertainty is the main result of Brexit so far and while this can have an impact on investment levels, the research suggests the UK is a strong overseas target.
The business links between Switzerland and the UK are extremely strong – with bilateral trade worth over £31.7b a year. Switzerland is a crucial market for UK goods and services and generally, the Swiss economy has performed well since the global financial crisis, growing by an average of 1.7% between 2010 and 2016.
Chris Bell, European Managing Director at Knight Frank, believes: “There is a huge weight of capital to be allocated to European real estate… the question is where it will be deployed.
“Opportunistic investors will be looking at emerging asset classes and peripheral locations to generate returns… in this context the emergence of the UK as the European market of choice in 2019 is interesting, suggesting many think that the pricing looks attractive.”
European buyers were one of the most dominant investing demographic in Central London during the last quarter of 2018, making up 40% of the overall sector. This is set to continue across the entire UK, buoyed by attractive pricing and positive forecasts for the future of the market. Within the sector, regional cores are delivering excellent rental yields and demonstrating further potential growth.
For Swiss investors that are dealing with a competitive, low-capacity market, alternate opportunities in foreign markets such as the UK can offer attractive yields and diversification for any portfolio. With Zurich offering the lowest yields of major European cities at the start of last year, London is a much more lucrative market. As the landscape continues to be influenced by incredible investment that drives unprecedented demand, there has never been a better time to invest in the UK.
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