London Property is Fuelled by Foreign Investment

London is a big, bustling city with a property market every bit as complex as you would expect from such a major financial and economic centre. That being said, if the many and complicated dynamics behind London property right now were boiled down to a single driving force, that force would probably be investment coming into the UK capital from overseas.

Foreign investors have been rather maligned in the London market lately, at least in popular conversation. Wealthy foreign individuals and businesses have long been keen to snap up properties in the UK capital as investments. Because of this they have lately been getting the blame for driving up prices, exacerbating the housing shortage, and generally making properties unattainable for Londoners trying to buy a home.

But the situation is not quite so straightforward. What this view fails to take into account is the fact that foreign investors are one of the key supports, that props up the London property investment market. They play a massive role in driving the market and providing much-needed capital that allows new developments to go ahead. If foreign investors were to be removed from the equation entirely, then there would indeed be fewer individuals and entities snapping up new builds, but there would also be a lot fewer new builds springing up. Home-building in London is heavily fuelled by foreign capital, and a great many developments are made on the back of overseas investment. Investors from overseas are much, much more willing to buy off-plan than UK buyers, especially owner-occupiers, and without this off-plan buying many developments would never raise the necessary funds to go ahead.

In many ways, this is true now more than ever. Before the EU referendum, it was predicted that UK property markets would take a noticeable hit from a vote to leave. While the London market is in many ways separate from the rest of the UK, in this case it was expected to be no exception. While a vote in favour of leaving the EU did indeed materialise, most of the negative consequences forecast for the London property market have not, and the capital has foreign investors to thank for propping it up in these adverse conditions.

The sheer lack of certainty surrounding Brexit is hardly attractive to investors, and certainly represents an increased risk profile. For many overseas buyers, however, this is not the only factor at play. The value of the pound plummeted in the wake of the vote to leave the EU and has stayed low ever since. For foreign investors, this is a very favourable exchange rate shift and represents a significant reduction in the effective cost of buying desirable London properties. Buyers from across the world, notably from Asia, have been taking advantage of this and taking an interest in new London developments. It is the demand and the funding that these investors provide that has helped to shore up the market against the present lack of certainty and keep London property going relatively undaunted by Brexit.