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Grexit Could Be Good For The UK Property Market

 

With it looking increasingly likely that Greece will exit the euro much is being made of how this will affect the British economy and that is likely to have a follow on impact on the UK housing market.

But as far as property is concerned it could be positive news. There may be emergency meetings at government level with the Bank of England but economists are already saying that the euro turmoil means that it is more likely that UK interest rates will stay low.

There had been talk of an interest rate rise later this year but that could be pushed back to early 2016 or even later, according to some experts. If so this would be good news for buyers, especially first time buyers.

On the face of it there is good news from a Halifax study that shows first time buyers in the UK account for almost half of all homes bought with a mortgage, a rise of 38% since 2011. But you need to look beyond the headline as the research also shows that in the first six months of 2015 the number of first time buyers is down 7% compared to the same period in 2014.

Grexit text with Greek and Eu flags illustration

On top of this rising house prices mean that first time buyers are having to find a 6% higher deposit than a year ago. And while the government’s flagship Help to Buy is definitely doing what it was designed to do, it will not last forever.

There are also been some concerns raised about a fall in the London market, especially the top end. Now much of this was due to jitters surrounding talk of a mansion tax in the run up to May’s general election and this seems to be changing and it is the situation in Greece that could help. Independent property buying agency, Black Brick, is reporting an increase in Greek clients looking to invest in London.

This is not a surprise. Time and time again economic and political instability sends overseas buyers to the UK’s stable property markets. There is also much talk of stock markets crashing as the Greek crisis plays out and this again could send wealthier buyers to the London prime property market.

According to Camilla Dell, managing partner of Black Brick, Greece’s rich have long been a feature of the top end of London’s property market, but the country’s recent woes have seen a different type of buyer arrive from Athens. Middle class Greeks are looking to acquire London property as a hedge against the effects that a return to the drachma would have on pensions and similar investments held in Greece.

They are typically looking for investment properties up to the £1 million mark that can provide stable income and hold their value. It is London’s near universal appeal to international property investors that provides that stability, especially at the prime end of the market.

But market conditions can also affect the UK property investment market in an adverse way. For example, demand from Singapore has fallen in the last six months due to the Singaporean authorities imposing restrictions on mortgage borrowing to prevent a domestic property bubble, with knock-on effects on Singaporeans’ ability to fund international real estate purchases.

There is also growing demand from China in the UK market and the Chinese are also investing in property in countries like Spain, attracted by the country’s visa which offers residency from an investment of €500,000 and above in property. The so called Golden Visa has attracted 530 foreigners since its introduction in September 2013, with most property investors being Chinese, Russian or Arab.

For the rest of the UK market demand for property in May was at its highest level since September 2014 at a time when supply has seen a large fall year on year, according to data from the National Association of Estate Agents. So while the stock market might take a blow from the situation in Greece, the British market is likely to weather the euro crisis.

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