Now is a perfect time for overseas investors planning their investment portfolio for the coming year to examine the wide range of options that are open to them within the UK property market.
With ongoing weakness in the pound (GBP) a factor that investors have come to see as a benefit during recent years, the fact that analysts are now predicting a return to strength for the currency could be viewed as a potential hindrance to securing lasting returns in the UK, but is this necessarily the case?
Rising value of sterling creates opportunities for investors
Dutch lender ING believes 2018 could be a positive year for investors into the UK property market, with a resurgence in the value of sterling helping to drive up long-term gains for those already invested.
Individuals who act fast to secure the strongest possible exchange rate on their investments into the UK property market will therefore be best positioned to take advantage of this upturn in value.
With ING predicting the possibility that sterling could rise by as much as 13 per cent this year, investors with an eye on the longer term should be able to secure far higher returns than in previous years, as the currency remains largely under-valued in the wake of fallout from the Brexit referendum in 2016.
Currently, GBP stands at approximately $1.40 to £1 on average in forex trading. However, ING expects positive UK economic data to push this figure higher to around $1.50 as 2018 progresses.
Indeed, FX strategist at ING Viraj Patel told Bloomberg: “The conviction is for cable at $1.40 based on a one-off positive reappraisal of the UK economic story and BOE. Then we’d expect some stability in the $1.40s, before late-cycle dollar weakness takes cable back toward the $1.50 level.”
Factors prompting a resurgent pound
As we’ve mentioned, a combination of factors are expected to help elevate the position of GBP during the coming months against its forex rivals, with the culmination of the government’s ongoing efforts to move into Phase II of the Brexit negotiations with the EU primary among them.
ING head of currency Chris Turner stated: “We look for GBP to be one of the primary beneficiaries of reduced policy uncertainty – at least in the early part of 2018. Approval to proceed to Phase II of Brexit should prompt a brief re-rating of the UK economic cycle.
This is not an isolated upward driver, however, with a range of other measures also likely to deliver renewed strength for sterling this year. These drivers include political factors that are set to impact markets in Europe, with continued uncertainty surrounding the upcoming general election in Italy and a reduction in extraordinary stimulus measures from the ECB that will come into effect this year.
Back in the UK, markets are therefore looking extremely attractive to overseas investors at present, as a renewed sense of stability and economic uplift is helping drive enhanced confidence in many sectors.
Investors into the UK property market will therefore benefit from this growth in confidence as the year progresses, with a strengthening of sterling a positive factor that could help to support even greater gains in the years ahead.