Hongkongers are likely to purchase “significantly” more homes in the UK over the coming months as a weaker pound brings more properties in London and other British cities into their price range, according to analysts.
The pound just hit a near two-year low against the US dollar, and observers expect it to depreciate further amid a forecast slowing of the UK economy, playing into the hands of Hong Kong buyers despite rising interest rates.
“The pound sterling has hit a new low against the dollar, and is currently at its lowest level since the start of July 2020,” said Nina Coulter, UK board director and director of residential development sales at Savills. “This significant drop in the value of the pound makes homes in the UK more attractive to buyers from Hong Kong.”
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The uptick in demand from Hong Kong buyers is likely to be pronounced, she added. “Whenever there is a 5 per cent or more downward shift in the value of the pound against the dollar, we tend to see a 10 per cent or more uplift in inquiries from Hong Kong buyers for homes in London, and the level of deals rises significantly,” Coulter said.
Hongkongers are one of the biggest groups of foreign homebuyers in the UK. Many seek investment opportunities and homes for their children who are studying in London and other cities. Since the UK last year instituted a fast-track residency scheme for Hongkongers holding a British National (Overseas) passport, more have been seeking to buy UK homes that they intend to occupy. That trend, in turn, has UK property agents providing more hand-holding on issues such as taxation, mortgages, and what areas and properties clients can afford.
As of last year, 104,000 Hongkongers had applied to relocate to the UK under the programme, with 93 per cent of them winning approval, according to government data. As many as 322,400 immigrants from Hong Kong are likely to purchase a home in the UK through 2026, according to estimates by the British government.
In the coming months, the sterling is likely to depreciate further, as the UK economy is forecast to contract. Monetary authorities last week raised interest rates for the fourth time since December to tame rising consumer prices.
Although the higher interest rates in the UK may deter some from buying homes there, for many Hongkongers the decline in the value of the pound still makes a home purchase in the UK more attractive, according to Felix Cheung, head of sales at JLL’s international residential in Hong Kong.
“The impact of the decline in pound sterling value outweighs the increase of interest rates in the UK,” he said.
Monetary officials in the UK are walking a fine line to strike a balance between rising consumer prices and economic pressures, so they may not be able to continue hiking interest rates in the coming months, according to Tom Bill, head of UK residential research at Knight Frank.
“Hong Kong buyers are well-informed and tend to pay close attention to movements in global financial markets,” Bill said. “The currency discount on offer in the UK since the Brexit vote has therefore been an important driver of demand, and any current or future weakness in sterling will have the same effect.”
The pound will see more downward pressure if the Bank of England raises rates at a slower pace than anticipated because of the situation in Ukraine, or if domestic political uncertainty increases, he added.
How Hongkongers became the biggest foreign homeowners in London
Average home prices in the UK rose by 1.1 per cent, or £3,078 (US$3,795), in April, marking 10 straight months and the longest run of monthly rises since 2016, according to an index by mortgage lender Halifax.
For developer Argent Related, which has recently launched the presales of its Brent Cross Town development in the north London district of Barnet, the pound’s weakness is good news.
“If the pound drops further in value this can only be good for sales to Hong Kong buyers at Brent Cross Town,” said Tom Goodall, partner and head of residential at the developer.
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