Four weeks after the referendum to leave the EU, the short-term dust is starting to settle a bit and property market analysts are assessing the medium and long-term effects of the historic vote.
Many aspects of how and when Brexit will be implemented remain uncertain as investors size up opportunities and risks. The real estate services firm JLL released a briefing on 12 July with its take on where the market might be heading, including the following observations:
- Office: Occupier demand cooled in Q2 and looks likely to remain subdued through the rest of the year, as occupiers take stock of Brexit’s implications. Flexibility will be essential for near-term decision making.
- Retail: Retail has generally responded well to fluctuations since 2008, and retail spending remains relatively robust. Resilient retailers will hold on, while weaker secondary chains will have more exposure.
- Residential: High-end properties in London will see more demand from non-EU international investors, especially those whose currencies are pegged to the dollar.
Mark Cleverly, the head of commercial development for Arcadis, holds a similar view about an influx of foreign, non-EU investment into the luxury segment. “This could boost British construction again in the future, as well as giving a shot in the arm to the Treasury though increasing stamp duty receipts.”
Indeed, prime real estate deals jumped 38% in the week immediately following the referendum, according to Knight Frank, as the lower valuation of the pound and lower prices created a buying opportunity, particularly for overseas investors.
Most analysts agree it’s too soon to tell what the longer term impact will be, especially in the commercial sector, where multinational finance and banking firms are weighing their options.
Overall, the outlook seems to be short-term caution for London commercial and property markets, while the immediate effect elsewhere in the country will be less severe. But there are encouraging signs; Derwent London announced it has pre-let nearly 85,000 sq ft of East London office space to four new customers – four of whom signed deals after the referendum.
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EU Referendum: Making sense of Brexit – update (JLL, 12 July 2016)
Will Brexit mean bargains for home buyers? (Financial Times, 18 July 2016)
Post-Brexit: property asking prices continue to drop as buyers demand better deals (Homes & Property, 14 July 2016)