updated 5:55 PM CEST, Oct 20, 2019

Some HNW Americans reported snapping up Brexit-impacted UK property bargains

The combination of significantly lower prices for desireable London property and a strong U.S. dollar – both seen as at least in part as the result of uncertainty over Britain's political future as a result of the UK's Brexit troubles – has seen at least some wealthy Americans snapping up some of the most expensive of these London properties, at reduced prices that most people would still consider to be eye-watering.

Among these recent American purchasers of high-end London residential property was Kenneth Griffin – a "billionaire hedge fund tycoon," as the London papers referred to him this past week – who was reported to have  just spent £95m (US$124.2m) on a Georgian house near St James’s Park, in London's pricey Mayfair district. 

Griffin is the founder of Citadel, a US$28bn hedge fund based in Chicago.

The purchase represented “the most expensive property sale in Britain since 2011,” the Times newspaper noted, even though the property, at 3 Carleton Gardens, had originally been on the market for £145m.

This news was followed a few days later by a report from Savills, the international property company, which noted that sales of residential properties in the £15m-and-higher category were bucking an otherwise downward "Brexit" trend, by surging, in terms of numbers of sales as well as when measured by combined sales volume, compared with 2017 levels. (See table, below.) 

The number of £15m-and-higher sales leapt 43% in 2018, to 73 such properties worth a total value of £1.997bn, compared with the total reported in a "subdued" 2017, worth a combined £1.414bn.

 Almost £4bn-worth of prime London homes worth £5m or more changed hands in 2018, the Savill data showed, up 10% on the previous year's data. This, the company's research experts said, showed how the central London resi property market "has very different drivers to the capital’s broader, more domestic prime markets."

"The price falls we've seen in the central London market, when combined with the depreciation of sterling, means the trophy properties of Central London look relatively good value in an international context," added Lucian Cook, head of residential research at Savills.

With respect to the American expat sector specifically, Savills head of London residential sales Jonathan Hewlett said that the company had "seen more interest from US dollar buyers [recently], primarily those with a real need for accommodation in London, and it’s clear that the exchange rate advantage is giving them the confidence to transact."

Sterling has fallen 25% against the U.S. dollar since the end of June, 2014. Today the pound was trading at around US$1.32.

Hewlett noted that the last few weeks of 2018 "saw some very big ticket deals in prime central London" in spite of an unusually volatile time on global financial markets, as "some clever" international buyers (but "not a flood") took advantage "of what they perceived to be a real opportunity".

 Almost 20% decline

Some might argue, of course, that it doesn't require cleverness as much as deep pockets to buy prime residential real estate for almost 20% less than it would have cost at its peak four years earlier – which, in essence, is what the Savills' data shows these HNW international buyers have been doing.

As the Savills data shows, property values in the prime central London market peaked in June 2014, and have since fallen by 19.4%, with a 4.1% fall in 2018.

Savills Research data on London property sales 2018 v 2017
Above £15 million, prices fell by a slightly greater figure, of 22.6% in total. 

This means that a central London property worth £5m at the height of the market in 2014 would now be purchased for closer to £4.03m, Savills notes, adding that this adjustment "far outweighs the additional stamp duty rate payable, even as a second home or investment purchase", that would now be included.

What's more, Savills adds, "the net 15% cut in combined cost of purchase is much higher for overseas buyers with a currency advantage." 

However, less so than in the past, foreign buyers haven't been rushing in, Savills points out, citing a reluctance thought to reflect "the political backdrop".

"But, once [this] uncertainty clears, this discount should underpin a bounce."

In total, Savills noted that some 73 London properties worth more than £15m were sold last year, with a total value of just shy of £2bn. This was the highest total since 2014, when the government introduced new, progressive stamp duty tarrifs, resulting in much higher transaction costs at the top end of the market.

"In 2017 there were just 51 sales in this price bracket, with a total value of £1.4bn." 

'Super-rich' snapping up mortgage deals

In a related story, the Times of London noted that "hugely wealthy" buyers are among those taking advantage of "heavily-discounted" mortgages currently on offer, as they "move to protect their fortunes from the threats of Brexit or a Jeremy Corbyn government". 

"The surge in demand for large loans from foreign investors and tech entrepreneurs, among others, has been so great that some high-street banks have set up specialist departments to deal with them," the Times report, last Saturday, noted. This trend isn't limited to London or even the UK, the report said, citing Core Logic data showing that "almost a quarter of the existing U.S. mortgages for between US$10m and US$20m were taken out in 2017, with 16% taken out last year." 

In the UK, meanwhile, the Times reported last October that British property tycoon Nick Candy had taken out an £80m mortgage on his penthouse at the One Hyde Park development in London, which it said he intends to rent out. 

To read an in-depth report on the American expat appetite for U.S. residential property, published in September, click here.   

To read and download a chart featuring the offerings of some providers of UK mortgages to American expats, click here.