A weak British pound lets Asian investors snatch up London property on the cheap

Getting onto the London property ladder has become desperately unattainable for many with the average cost of a London home having rocketed higher by 12 pct over the past year to reach 515,379 GBP say Rightove.

This as the average earnings of a UK worker was shown to have increased 0.9 pct on a year-by-year basis in May.

So what is driving house prices higher if your average worker is seeing their pay packet outstripped by housing inflation 12-fold?

The weak British pound

A new report issued by Prime London Central (PLC) has today laid the blame for housing inflation firmly at the door of international investors who have been aided by the UK's weak pound. GBP has decline by 7 pct in 2013 alone.

For reference's sake, today we see the pound euro exchange rate at 1.1580, the pound / US dollar exchange rate is at 1.5096.

The pound Australian dollar is at 1.6636, the pound / Singapore dollar exchange rate is at 1.9120 and the pound / Hong Kong dollar exchange rate is at 11.73.

(Note that these are spot market exchange rates - your bank will affix their own discretionary spread to the figures. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please learn more here.)

London property looks cheap if you are from Asia

According to PLC overseas investors make up at least 60% of the total buying population; and because of the devaluation of the GBP, property in London’s best addresses actually looks ‘cheap’.
Investors from South East Asia, who comprise the largest proportion of LCP’s buyers at 40%, have profited the most from a weakening sterling.

For buyers in Hong Kong and Singapore, currency adjusted property prices have actually fallen, dropping by 10% and 12% respectively since their 2007 high.

In Malaysia, where the Ringgit has strengthened significantly over the last six years, the price drop was also 10% and in Thailand, prices saw a marginal growth of 3% over the same period.


Investors from the Middle East, where the currency is pegged to the US dollar, have also felt the benefit of sterling’s decline. When exchange rates are taken into account, prices for these buyers’ stand just 6% higher than the peak of the market prior to the credit crunch.

London is a financial centre, a ‘go-to’ destination, a pinnacle of culture and an educational hot-spot. Importantly, during the credit crunch with the upsets in the Eurozone and the Arab Spring, London Central’s safe haven status has pushed it even further to the fore. It is no surprise then, that the resultant effect of the low cost of sterling, coupled with cheap debt has stimulated an influx of foreign buyers into PLC.

Moreover, the appointment of Mark Carney as the new Governor of the Bank of England has brought further good news for potential PLC investors. Interest rates remained static at 0.5% for the 53rd consecutive month as the MPC maintained the status-quo and indicated that there was little expectation of change before 2016. This saw the pound drop even further (by over 1%).

“Whilst it may sound absurd, property prices in PLC look particularly good value for international investors as prices in their home markets rise substantially and sterling remains so weak. For Singaporean investors, for example, the average PLC property cost S$2,003,276 in October 2007 but costs S$1,718,044 today. So, not only does PLC residential provide excellent prospects of capital growth, given that strong demand consistently outstrips supply, it looks excellent value for money for overseas buyers” comments Naomi Heaton, CEO of London Central Portfolio.