Demand from foreign buyers surges in wake of mini-Budget and falling house prices
By Rachel Mortimer
Wealthy foreign buyers are snapping up London’s most expensive homes in cash, tempted by a cooling property market and weak pound.
Half of the homes sold in “prime” central London in January were bought without a mortgage, up from 42% in the same month in 2022 and 38% in January 2021, according to analysis by estate agency Hamptons.
Demand from international buyers, especially those with currencies pegged to the US dollar, surged in the wake of the mini-Budget last year as the pound dropped to a record low and they pounced on huge discounts.
The pound has since recovered to the level seen in August last year, but buyers who exchanged funds during the market dip are now reaping the rewards.
Victoria Allner, of BNP Paribas Real Estate, said foreign cash buyers were effectively securing a “double discount” on London homes.
Ms Allner said that some people were buying in cash and then taking mortgages out later.
She said: “International buyers, particularly those who are dollar-pegged from the US, Middle East and Asia have been looking to actively take advantage of the devalued sterling since the mini-budget.
“Their strategy is to buy now but leverage later – making the most of the slight decline in property values and the discount given by current currency levels, while not subjecting themselves to mortgage rates until they become more attractive.”
Ms Allner said one super wealthy client from the Middle East had exchanged their currency last year when the pound plummeted and now had a budget 25% bigger ready to spend on property.
She added: “It’s effectively in line with the discount between the pound and the dollar at the low of September.”
Buying agent Black Brick reported the share of cash buyers had more than doubled as borrowing costs rose throughout last year. Half of its clients now pay in cash, up from an average of 20% in previous years.
Cash buyers are favoured by sellers because they offer a quick and simple sale, unlike mortgage borrowers who must contend with an often arbitrary lending process. Their appeal is no different in prime markets.
Camilla Dell, of Black Brick, said: “Many vendors will place significant value on securing a cash buyer for their property, particularly in a market currently riven with down-valuations and fall throughs.
“They may even accept a lower offer for their property if the buyer is able to pay in cash. It is a buyers’ market at the moment and being a cash buyer means that you have a better chance of getting a better price agreed.”
Business from across the pond, she added, was booming. Almost a third of the company’s transactions in 2022 were with US buyers, more than double the 12.5% recorded in 2021.
Ms Dell said: “There’s an investment case for US dollar buyers to be eyeing the market right now.
“Prime central London property values are down 18pc since the peak in 2014, combined with the currency effect, dollar buyers are now getting a 42% discount compared to then, all making it very appealing.”