The pound fell to an eight-week low after last week’s surprise general election result, which has increased uncertainty over both the forthcoming Brexit talks and the UK’s economic prospects, and although the currency recovered from its worst levels as Theresa May announced she was forming a new government with the support of the Democratic Unionist party, the political turmoil has once again exposed sterling’s vulnerability to wider market shocks.
Sterling’s value has fallen sharply since the vote to leave the European Union almost a year ago, and that has attracted many international property investors, because quite simply, a weaker exchange rate means that UK property is now a lot cheaper for foreign buyers.
The latest decline in the pound’s value could now attract more opportunistic overseas property investors seeking to take advantage of effective discounts caused by the pound’s depreciating value against other major foreign currencies.
“Undoubtedly the pound will drop further against the dollar and euro which, perversely, will render UK property even cheaper for the international buyers and, at the same time, help the exporters,” said Trevor Abrahmsohn of Glentree Estates in north west London.
In the midst of what he described as “another democratic disaster”, Jake Russell, director at Russell Simpson, said that he is “dismayed as to why an election was ever called”.
He continued: “Since the [EU] referendum, we’ve been desperate to bring a sense of calm and stability to the political spectrum, however, all this has resulted in yet more doubt and instability.”
On the issue of the pound and whether the currency would possibly depreciate in value as a consequence of the election result, in turn attracting greater foreign investment, he added: “With the pound floundering we could well see another wave of dollar buyers taking advantage of an improved exchange rate, but there will undoubtedly be some backlash in the market as some buyers pull out altogether.”