Is there currently a “once in a lifetime opportunity” for investors in the GCC to acquire assets in Britain following the EU referendum?
- Investment experts in the GCC believe that there is the potential for a huge investment opportunity in the UK following the outcome of Britain’s EU referendum
- Immediate economic uncertainty saw the value of the pound fall to its lowest for 31 years – making UK real estate as much as 12% cheaper for investors dealing in dollar-pegged currencies
- Brexit is also likely to delay any rise in the US Fed, which would be “more positive” for GCC economies
Will the UK’s vote to leave the European Union (EU) trigger a significant flurry of interest from investors based in the GCC?
A number of analysts and investment experts based in the region believe that, following Britain’s referendum last Thursday (June 23rd), GCC investors could capitalise on the immediate uncertainty created by the result and acquire a UK asset with greater affordability.
In the early hours of June 24th, when news of the result was breaking, the pound fell 10% against the dollar. It then fell further on Monday (June 27th), when one pound was worth as little as $1.322, its lowest for 31 years.
For property investors dealing in dollar-pegged currencies, such as the dirham or riyal, UK real estate became 12% more affordable in the space of four days.
With UK market growth likely to return as Britain begins the process of negotiating its path out of the EU, Tim Fox, Chief Economist of Emirates NBD, underlined in a note the importance for investors to make their move sooner rather than later.
He said: “GCC investments into the UK may begin to look much more attractive considering the exceptionally weak sterling levels that might be seen, representing something of a once in a lifetime opportunity to purchase UK assets.”
Furthermore, a study published this week by Global Investment House suggests the sustained period of low interests Brexit is likely to initiate is beneficial for GCC nations.
It outlined: “We expect the Brexit and consequent events to push the US Fed to take a much more dovish view which would result in a delay in the rate rise. Given the currency peg of the GCC countries, such an event would be more positive for the GCC countries as lower oil prices have resulted in slower growth and a lower interest rate would be conducive in this scenario.”
UK real estate is one of the most popular international investors for GCC investors. Offering strong yields and portfolio diversification, none of the fundamentals that underpin the strength of the UK property market are dependent on the country’s membership of the EU.
As well as the currency window, investors are also expecting a peak in yield growth as mortgage lending restrictions trigger a wave of new people turning to rental accommodation in the short-term, before achieving strong capital appreciation as the UK’s economy prospers outside of the EU.