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Overseas investment savings with UK property

How can investors benefit from overseas investment savings as the pound drops?

For investors that are based abroad, the UK property investment market has been attractive long before the pandemic thanks to property price increases, but more recently, overseas investment savings on currency fluctuations have kicked things up a gear.

It feels okay to now describe the ‘mini budget’ presented by Liz Truss and Kwasi Kwarteng as disastrous given that it pretty much crashed the gilt and bond market in the UK as well as flatlining the pound sterling.

Whilst things have recovered since the mini-budget finished off both Truss and Kwarteng, there has been a sustained weakening of the pound for a while now. Back in January of this year £1 would buy you $1.37 but, at the time of writing, you’re looking closer to $1.21 – a fall of 12% in less than a year.

It may not seem like a massive amount if you compare pound for pound, however, if you consider a 12% saving on a property worth £200k then you start to see how things can get quite significant and, of course, if the pound recovers as expected then this also adds further value in the long term.

What overseas investment savings are available?

So if we know that there are overseas investment savings to be had, let’s take a bit of a closer look at the figures and see what that means in practical terms.

If we consider an example of a buy-to-let apartment, say the cost of an apartment is £160,000. The cost back in May would have been €189,273 but now covers roughly €185,028 a saving of €4,245.

If you were investing in May in USD the cost would have been $200,054 but now converts to $190,944 a huge saving of $9,110

Finally, if you were investing in AED currency, it would have cost you AED 734,702 but currently converts to AED 701,243, a saving of AED 33,459.

Clearly, these are big overseas investment savings, but there are also two other things to consider in this scenario.

Firstly, it’s expected that the pound will recover within the next two to three years to January levels, meaning that the savings you’ve made from investing now double as the price increases back to previous levels or potentially higher.

Secondly, an investment property is an income-generating asset, meaning that whilst the pound is weak you’re making even more back on your investment via currency exchange savings.

For overseas investment savings, it really doesn’t get much better. Add to this the fact that the majority of our properties are managed and more of a hands-off investment, and you’re truly able to sit back and allow your investment property to work for you.

Finally, after a slight drop in 2023, it’s expected that property prices will increase at a stable and decent rate over the next few years so, in addition to any savings made from currency exchange, you’re also adding into the mix any asset appreciation too.

If you’re interested in UK property investment and overseas investment savings then why not get in touch with us today?