Favorable exchange rates have triggered a wave of dollar-backed buyers looking into prime London properties, real estate agencies are reporting.
Looking for ways to take advantage of the weakened British pound, wealthy Americans and millionaires from the Middle East have increased inquiries and purchases of London homes valued at least £5 million (US$6.2 million), according to a report Monday from Beauchamp Estates, Leslie J. Garfield & Co. and IItam Real Estate.
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Sales to American buyers have risen 3% in the past six months, while inquires have increased 10%, according to the real estate agencies.
Dollar buyers are currently getting around a 10.6% discount on real estate in London due to the weakened sterling, the report said. A pound is now worth about $1.24, compared to nine months ago when it was trading for roughly $1.45.
Americans aren’t the only ones with dollars to burn. Many Middle Eastern countries, including Saudi Arabia, the United Arab Emirates, Jordan, Oman, Qatar, Lebanon and Bahrain, have currencies pegged to the dollar, as do Hong Kong and Macau. There is also a sizable community of high-net worth Indian nationals living in the UAE, who likewise benefit from a strong dollar.
Sales of London properties of at least £5 million to Middle Eastern and Asian buyers have increased 10%, while inquires have risen 15%. Sales specifically to Indian buyers based in the UAE are up 5%, while inquires have increased 10%, according to the wealth report.
To put the exchange rate in perspective, a dollar buyer snapping up a 3,900-square-foot flat in Mayfair pays on average $18.489 million these days, compared to $20.693 million in 2015, according to the report.
The last six months mark a change in the tide of global cash flows. In 2014-15, the once-strong sterling spurred a rise of U.K. investors buying properties in U.S. hubs like Manhattan, said Gary Hersham, partner at Beauchamp Estates.
"Over the last six months the situation has reversed and it is now dollar investors who are finding London real estate is providing them with lucrative opportunities," Mr. Hersham said in a statement.
Beauchamp isn’t the only prime London agency to note an increase in dollar buyers and currency may not be the only factor at play. Rokstone also noted a bump in Middle Eastern and Asian inquires following U.S. President Donald Trump’s executive order banning immigrants from seven Muslim-majority countries. (That order has been blocked by the courts, but the administration has an alternative plan in the works.)
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Becky Fatemi, managing director at Rokstone, said ever since 9/11, increased sanctions, border checks and hassles have persuaded Middle Eastern and Asian buyers to look for opportunities in alternative locations like London, South of France and Dubai. A favorable currency climate is an added bonus now.
"New York and Miami’s loss, is London and Dubai’s gain," Ms. Fatemi told Mansion Global at the end of January.