Weak pound lifts sentiment for London property

Mipim UK, a property show in London on Wednesday. The falling pound makes London property ‘more interesting’. Eleanor Bentall / The National

LONDON // The property market in London is experiencing a surge in interest from foreign investors, including those from the Middle East, despite the “froth” coming off the sector, a prominent UK banker has said.

The 17.4 per cent devaluation in the pound against the US dollar since the Brexit vote in June is a major driver of the renewed interest, said Sir Howard Davies, chairman of the Royal Bank of Scotland.

“There’s no doubt that for dollar-based investors, the falling pound has made London property more interesting again. And we are seeing some signs of investors who had sat on the sidelines, post-Brexit, are coming back and making inquiries,” said Mr Davies.

“I couldn’t say that we have yet seen any great [deal] flow. But I think people are more interested at this price level than they were immediately post-Brexit.”

The banker was responding to a question posed by The National at Mipim UK, a property trade show that began in London on Wednesday.

But the former deputy governor of the Bank of England warned that the London property market could be hit by an exodus of financial workers, while real estate investment yields are “uncertain” and the wider UK economy in a fragile state.

Mr Davies said the UK economic climate is “worrying” given that there is only “modest” growth despite the positive forces of low interest rates, oil prices and inflation.

He forecasts that several financial services companies will move staff out of London following the UK ’s vote to leave the European Union – something he considers will affect a property market that has already come off the boil.

“The froth has gone off the London property market,” he said.

“When I talk to financial firms about their location decisions, they are talking about moving people from London to Frankfurt, Berlin, Luxembourg.”

Financier and investor Guy Hands, the chairman of Terra Firma Capital Partners, one of the largest private equity firms in Europe, said the UK capital’s financial district will “continue to thrive”.

“There’s no way that Paris, Amsterdam or Frankfurt are going to replace London as a centre of financial excellence in my lifetime or my children’s lifetime,” said Mr Hands.

“One of the big mistakes that some of the Europeans are making is the belief that they can somehow take the financial services business out of London, and they can plonk it in Frankfurt, or plonk it in Paris, or Amsterdam. It’s not going to happen. If the financial services business moves out of London it will move out of Europe. And it will affect Europe very negatively indeed.”

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