Sterling Strengthens: Mixed News for UK, Good News for Europe

The Pound is strengthening against the Euro. The value of Sterling rose from €1.07 to €1.10 between last Monday and the Monday before, it stood at €1.11 when I checked last Friday, and it grew from €1.125 to €1.127 overnight. This means its current value is at €1.12 but it is fast approaching €1.13 (source: XE.com).

This growth in the value of Sterling against the Euro could be very positive for Euro zone property markets. Many Brits are growing dissatisfied with the returns from other investments, including the interest paid on bank held savings, depending by how much Sterling strengthens it could be the final kick they need to put their money into the tangible asset of an overseas property investment.

The currency shift has long been predicted by economists, though it may be happening earlier than anyone expected. It is entirely likely that many shrewd people will have been waiting for the currency change to buy their dream holiday home or investment at a bargain price.

This will bring mixed feelings in the UK however. The weak Pound made UK property cheaper to European buyers, which on top of the price-drops already seen in the UK brought European property investors into the UK in their droves. The current currency change will undoubtedly reduce their prevalence in the market.

This will be viewed as bad news by anyone selling a property in the UK -- especially prime properties and especially in London. However the European buyers have also been a bit of a false dawn for the UK property market. The foreign buyers greatly increased activity in the market, which was viewed in a positive light, but foreign buyers are unreliable and left our market vulnerable to the current currency change.

I believe our market will find a more solid and reliable bottom; a much better base for recovery without the prevalence of foreign buyers, so I see it as good news. However, the strengthening Pound will also once again reduce our competiveness in the export world, especially within the Euro zone. This is bad news, and this is why there will be so many mixed feelings about the currency change in the UK.

For the Eurozone however it is a double whammy of good news. Heightened activity from British buyers will not be so detrimental to their market's finding a bottom because British buyers will be spread throughout Europe as oppose to all operating in small localities as they tended to do in Britain.

This is because Europeans buying in Britain were almost all doing so for investment, Brits buying in Europe will be mixed holiday home buyers and investors. Also because European countries don't tend to have the same levels of repossession as we have. At the same time Eurozone exporters will once again be on top, with British companies struggling to compete once again.