Since the UK’s historic decision to leave the EU was announced in June, there’s been an upward trend in UAE-based buyers enquiring about mortgages in the country.
Following the largely unexpected Leave victory, deVere Mortgages reports that mortgage enquiries from overseas buyers have risen by more than 50 per cent as a result of the vote.
This major uptick in demand can be attributed to five key factors:
1. Property in the UK continues to be in high demand among UAE residents. This is predominantly due to the enduring fundamental strengths of residential property investments in Britain. That said, a large number of potential buyers in the UAE had been delaying making enquiries about mortgages until the Brexit decision was announced. As such, since the outcome, many of these potential purchasers are now getting the ball rolling.
2. The UK housing market stopped to take a breath after the Brexit vote. According to a survey by the Royal Institution of Chartered Surveyors, house price increases slowed considerably a few months before the referendum.
The survey revealed property prices had dropped outright in London, East Anglia, the North of England and the West Midlands. Of course, this is an extremely attractive trend for buyers and UAE residents are keen to benefit.
3. Since the vote was published, the pound plummeted. Indeed, sterling tumbled against the dirham further still after the Bank of England’s recent cut in interest rates to historic lows, the first time since 2009. As such, UAE residents buying property in the UK using dirhams will find a better deal than before.
The post-Brexit volatility is providing a timely boost to the top-end property sector for overseas investors. The market has experienced something of a stutter in recent times as a result of stamp duty hikes.
However, since Brexit, the upturn in enquiries has seen savvy investors focusing on central London and some of the country’s wealthiest areas so as to benefit from the currency-pegged discounts after the pound’s nosedive.
As an example, the average price of a central London property fell by some Dh350,000 immediately after the referendum result was announced, which is positive news for international buyers now looking to dip into the UK property market.
London is seen as a secure, well-regulated market and a large number of potential buyers from the Middle East are familiar with the capital and its robust track record for capital appreciation.
Furthermore, since 2007 potential property buyers are looking at a significant 31 per cent fall in prices since the last peak in the market.
4. In the same vein, buyers are finding it far easier to raise a deposit in dirhams as a direct result of the post-Brexit pound. Potential UAE-based buyers are viewing the favourable currency situation as, in effect, being able to enjoy a discount on top of a discount. Apart from falling property prices, buying in dirhams benefits buyers with currency savings, as well as reduced prices.
Using one client based in Dubai as an example, where the dirham is pegged to the dollar, he made the most of a post-Brexit buying opportunity in Mayfair, central London. As well as a considerable reduction on the previous, pre-Brexit asking price — he saved the equivalent of around $96,000 (Dh353,000) — the client also made significant savings of up to 11 per cent by paying in local currency.
5. Finally, a large number of UK sellers are much more nervous after the referendum. For this reason, they may be more willing than they would have been without Brexit to accept lower offers from potential buyers.
— The writer is Managing Director, deVere Mortgages
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