Weakness of sterling driving investors to the UK

The current weakness of sterling against other major world currencies is helping to drive interest in the UK property market, it has been claimed. Anita Mehra and Marc von Grundherr, directors of Benham and Reeves Residential Lettings, noted that many investors consider this the "perfect time" to buy property.

"Current demand is fuelled by a number of factors," Ms Mehra said.

"The exchange rate is a driving force, making many homes 20 per cent cheaper than in 2006. Strong rental demand is another, with London remaining a focal point for global corporations, attracting increasing numbers of overseas executives here on secondment."

It follows the release of research from Knight Frank, which revealed that prices for prime London property rose by 1.4 per cent in May 2011, with annual growth now standing at 8.3 per cent.

"London has traditionally been viewed as a safe haven for property investment, offering capital appreciation together with good rental yields," she added.

"Its desirability has increased even further following the recent political turmoil in the Middle East."

Today (June 2nd) sterling hit a two-week low versus the euro, Reuters reports. The euro rose to 88.32 pence, its highest in four weeks.

The pound gained against a faltering dollar, however, helped by a purchasing managers' survey that showed UK construction activity grew more than expected last month.

"Sterling will do well against the dollar if the risk environment stays OK, but it will be harder work for it to make gains against the euro," said Tom Levinson, currency strategist at ING.

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Posted by Eleanor Ward