According to property investment firm Colordarcy, UK investors should look at property outside the European Union due to the current weakness of the pound sterling. Analysts at the firm have commented on the recent performance of sterling against the euro saying “The knock-on effect of this lack of faith in the UK economy is beginning to show itself with the falling pound and it is likely to make borrowing even tougher with the money markets showing less confidence in the country than they were.”
The managing director of Colordarcy, Loxley McKenzie, added “The UK had managed to avoid the fate of France and the US in being downgraded, however after months of speculation it now finally joins them in the sin bin. On a positive note, the US has managed to recover from its own downgrading with property in Florida growing in double digits in some areas, however the effect on the UK is less certain and credit downgrades certainly didn’t to Spain and Italy any favors. It is also the case that if property investors purchase in pounds, then money is not going to stretch as far in Europe as it did back in the summer of 2012.”
The firm has outlined two main impacts the weakening of sterling all have on overseas property investors, which are a weakening of spending power, and less choice of properties. They’ve also pointed out that investors thinking of purchasing European property at the moment are likely to find it less appealing than they did a year earlier, regardless of whatever an agent says. Obviously this leaves investors with a problem, as they now have to decide whether to invest in property in the UK, or to look beyond Europe to protect their wealth.
McKenzie has pointed out that although the UK is currently experiencing an upturn in property prices, the medium-term outlook isn’t certain as the recovery is still weak in many parts of the country, and the economy is struggling with falling exports and a falling pound. The worry is that the economy could grind to a halt as people struggle with the lack of any pay rise combined with the rising cost of living.
The answer could be to look at markets where the pound goes further, and where the potential returns outweigh the initial investment. These markets include Florida and Istanbul, as sterling hasn’t lost so much value against the dollar and the Turkish lira.