Luxury house repossessions may have been thrown a life line due to the recent and dramatic changes in the value of the pound. The sterling has dropped considerably against the Euro. One English pound £1.00 buys just €1.055 as of 24.12.2008. Nearly one to one…. Not sure if skiing will happen this year as a £7 pint does not seem that attractive.
This has many affects, UK owners of property in the euro zone will find paying off a mortgage harder with their weaker pound and inversely the Europeans will find buying property much like their Oxford Street shopping… cheaper. A friend bought a scarf yesterday and it was marked as £60 and €90 as it is sold in both markets, how things have changed in such a short time.
The Financial Times are adding to the gloom with topics like: Dec-12 House prices to fall further – Dec-05 Mortgage lending set to turn negative – Dec-19 UK interest rates lowest since 1951 – Dec-04 Extra support for those struggling to pay mortgages – Nov-25 Warning as house price fall eases – Nov-28 Property prices will end the year about 15-25 per cent down on last year which, together with the recent plunge in sterling, means properties may be at least a third cheaper for some overseas buyers.
The pound has fallen so rapidly as the money markets believe that the Bank of England could move the base rate down to 0%. Yes. nothing. Zip… While the pound has also suffered losses against the Swiss franc, dollar and yen.
So what does this mean for property? Agents have already noticed an increase in foreign buyers swooping in to purchase already discounted luxury houses. Knight Frank calculated that one of their houses for sale originally at £8m at the end of 2007 (at the time €11m) would now be the equivalent of €7.8m. This represents a 30% fall and buyers in dollars would have seen a 40% decrease. These are big savings, even for the super rich.
Estate agents said buyers from Europe and Asia were eyeing up luxury flats and houses in London as large savings could be made compared with a year ago.
Hamptons International’s Knightsbridge office has completed approximately 50% more deals in December than any other month this year with buyers coming in from the Middle East, China and India. The Indian buyers have been noted buy Douglas and Gordon while Winkworth have seen the Singapore and Hong Kong buyers re-enter the market.
So the super expensive houses might be a little safer from house repossession due to the falling pound and massive savings offered by this to the internationally well healed. Pity the super rich don’t want to buy a one up and one down in Preston to save someone from house repossession.
“The further Bank rate falls, the higher the margin which new tracker deals will be priced,” said Ray Boulger at John Charcol. “The best rate at the moment is Bank rate +1.49 per cent but, at the end of next year, most new trackers will be on a margin of at least 2.5 per cent over Bank rate.”