Currency movements provide unique opportunity for international buyers

By Alex Ogario, Head of the Private Office

For international buyers, the interest rate is just one factor governing whether an opportunistic purchase represents good value.

Currency movements can generate significant discounts. The surging dollar and relative weakness of sterling has widened discounts available to US buyers as well as those denominated in pegged currencies such as the Hong Kong Dollar and currencies in many parts in the Middle East. Meanwhile, prices in many parts of prime central London remain below peaks last seen in 2014, before Brexit, various tax increases and restrictions on travel imposed during the pandemic.

Mortgage rates have risen but as of today, with the base rate at 2.25% and the current level of fixed rates in the market, many of our clients who are in a suitable position are considering variable interest rate options again. This side of Christmas offers a narrow window of opportunity to capitalise on a unique set of conditions.

Prices in Knightsbridge remain 24% below their 2014 level. Combined with the currency movement, a US buyer would have benefitted from an effective discount of 53% as of October 2022 compared to July 2014. Buying a £5 million property in Knightsbridge would have previously required US$8.6m, a figure that had shrunk to US$4.06m. Source: Knight Frank

Capital values are likely to soften next year, which will tempt some purchasers to wait. Knight Frank forecasts suggest values in prime central London will fall 3% during 2023 before flattening the following year. However, waiting for a lower purchase price virtually guarantees a higher mortgage rate with the potential that currency discounts narrow.