When Europe decided to adopt the Euro there were very few countries in the European Union fighting against it introduction. The UK government of the day decided not to swap the pound for the Euro creating great controversy within the European Union and as a consequence the UK government was ridiculed and hung out to dry. Very few partners within the European Union could understand why the UK government was so against the euro but looking back perhaps it was one of the best decisions ever made by the UK authorities?
Many people are now asking the question, has the UK property market benefited from retaining the pound?
Simplifying the situation
While the likes of Germany and France dominate the European Union, other partners who adopted the euro also have an impact upon the currency exchange rate. Over the last few years we have seen Greece fall into disarray, Spain struggling to pull away from the economic downturn of 2008 and Portugal in a similar situation. Indeed France is still struggling and while Germany is by far and away the guiding light of Europe there has been some impact on the German economy. The fact is that no matter how strong Germany and France are, two of the powerhouses of Europe, they do not totally dictate the path of the Euro.
While it would be wrong to suggest that the 2008 US mortgage led worldwide economic downturn has not impacted Europe, we only need to look towards the US and the UK to see recovering economies. The situation in Europe is still shrouded in uncertainty and as a consequence property markets have been hit to a greater extent than the UK. The fact is that the UK pound is basically led by the UK economy which is a very simple situation when compared to Europe.
UK property market safe haven status
It is no secret that many overseas investors see the UK property market as something of a safe haven in these volatile times. The fact that UK property is valued in pounds sterling as opposed to euros has been a significant plus point and will continue to be so for some time to come. London in particular has benefited from the so-called “safe haven” status which has seen property prices in London and the south-east of England rise significantly.
There is no doubt that the euro will at some stage recover and safe haven investments in the UK property market may be switched to Europe and other recovering property markets. However, as we have seen over the last seven or so years the Euro is nowhere near as strong as many had predicted and there are too many uncertainties out of the control of the likes of Germany and France.
The UK economy
UK economic growth is expected to slow in 2016 at a time when Eurozone economies are expected to pick up the recovery pace. This may well prompt some investors to look at recovering European property markets but others may well see the UK as a long-term secure home for their property assets. Time will tell what kind of damage the 2008/9 US mortgage crisis has had on the Euro although at this moment in time many investors are happy to look elsewhere under different currency denominations.