Bargains Emerging in Britain

The steady decline of sterling’s value against the euro, along with plummeting property prices and an increasing amount of vacancies, has seen canny investors entering the British market.

Britain has long been a favourite for Irish property investors. In fact it has been so popular that there has been a tendency not to treat it as an overseas destination at all, such is the level of comfort exhibited by Irish investors there.

This probably explains why Britain, of all markets worldwide, is still showing some signs of attracting Irish investors, despite the protracted economic downturn.

For people involved in development in Britain, this isn’t as positive a trend as it may sound, unless they are prepared to list their units at significantly reduced prices. Amateur investors who will buy property at whatever price it is listed have been wiped from the market, and what remains is a core of hard nosed bargain hunters.

Consequently, current Irish interest in the British market is very limited in scope, and basically consists of investors looking for bargains from distressed sellers. As well as continuing property price slides, the euro has been on a particularly strong run against sterling, and is currently standing at around 94p to the euro – meaning that Irish investors are now getting almost 30 per cent more for their money than was the case just a year ago.

The flipside of this scenario is that, like the US dollar last year (which has gone from $1.58 per €1 last April to €1.20 now) it is predicted that this strength of the euro against sterling could be very short lived, so investors are taking advantage on two fronts.

First, the currency is enabling far cheaper purchases, which may well increase in value if sterling recovers as expected. Secondly, the British market is currently in freefall throwing up a lot of distressed product. This is adding to the attraction for Irish investors, who simply can’t pass up a real bargain.

…. According to Miles Shipley of RightMove, 2009 could be the year of the property deal. “ The market has plumbed the depths, with agents reporting sales being achieved at a discount of around 25 per cent from peak boom prices” he said.

….While the lowest base rates in history (currently at 1.5 per cent) have not fully fed through to British mortgage rates, those who can raise finance can now buy a lot more property for the same monthly repayments. This is stimulating interest from investors who are looking for a better home for their cash, while other asset classes are giving poor returns.

According to Eilis Fitzgerald “Investors are looking hard for deals, with most people only considering property that is being sold for 40 to 60 per cent below peak market values” she said. “those investors remaining in the market are seasoned campaigners who avidly hunt bargains and haggle mercilessly, so this environment suits them perfectly”.

….As for predicting the market going forward Liam Bailey said “The reality is that forecasting has become a game of luck – the ability to forecast sentiment, the Libor and base rate spread, or the next government intervention, is impossible with any degree of accuracy”.

Author: Diarmaid Condon

Publication: Sunday Business Post February 1^st 2009