Sharp falls in sterling and the prospect that interest rates could hit zero per cent next year are luring foreign buyers into the UK property market.

Sharlene Goff – FT.com – 19 Dec 2008

Property prices will end the year about 15-25 per cent down on last year which, together with the recent plunge in sterling, means properties may be at least a third cheaper for some overseas buyers.

The pound almost reached parity with the euro this week as speculation grew that the Bank of England would slash interest rates to close to zero per cent next year. It has also suffered severe losses against the Swiss franc, dollar and yen.

Knight Frank, the estate agent, calculated that a house priced at £8m at the end of 2007 – which at the time would have been worth €11m – would now go for the equivalent of about €7.8m. This represents a fall of almost 30 per cent in euros, more than double the drop for those buying in pounds. Buyers with dollars would have seen a decline closer to 40 per cent.

Knight Frank has seen more interest from Americans and Europeans in recent weeks, although most were not yet buying. Full Article