The slowing of the London market and the forthcoming buy-to-let stamp duty premium are pushing investors towards Europe — regardless of the prospect of Britain leaving the EU.
Jelena Cvjetkovic, the head of the Savills international associate network, says: “People are sensitive to currency rates, and if Brexit affects the sterling-to-euro exchange rate, that might have an effect. To be honest, if investors are thinking that way they are likely to have bought currency in preparation. Holiday-home buyers, though, are more influenced by personal circumstances.”
This week UBS, the Swiss bank, predicted that if the UK leaves the EU the pound could hit parity with the euro. At the time of writing it wasn’t far off, at €1.30 for every £1. However, Cvjetkovic says investors, although influenced by the exchange rate, are principally driven by the opinion that London property is fully valued and further capital growth is difficult. This has been compounded by higher stamp duty, forcing them to seek investments in places such as Berlin, Madrid, Barcelona, Milan and Rome.
This view is backed by Knight Frank’s Wealth Report, published this week, which shows some of the largest prime property price gains in Europe were seen in cities with strong rental markets (see chart left). Not everywhere is on the up, though. In Cannes (see right), prime property prices have fallen 2.7 per cent in the past year with buyers able to secure properties for 10-15 per cent below the asking price, and the prospect of high rental yields means it remains a good investment. Knight Frank’s key investment picks are: Germany, Madrid, Côte d’Azur, Ibiza, Méribel and Chamonix.
What is more, Standard & Poor’s, the ratings agency, has predicted that mortgage rates will remain low across Europe, helping to strengthen housing markets in the UK, Germany and Ireland. The agency says these three countries will see a 5 per cent increase in house prices in the next year. It adds that the Netherlands is also likely to show “robust growth”.