In every discussion with potential investors, inevitable the word Brexit pops up. The possible exit of Britain from the common market could be harmful to the UK economy, which might in turn directly or indirectly the rental yields or capital gains on real estate investment.
Especially in London, the retreat of many financial headquarters could affect the office rental market.
In London, there is indeed a stabilizing of Real Estate prices since june 2016. The rest of the country seems to have less problems with the possible Brexit. Outside of London, prices keep growing as if nothing will happen.
CBRE, Brexit and Real Estate
CBRE, one of the big boys in the world of real estate has recently published its “Brexit report“. They are investigating the possible effects of Brexit on the Real Estate market in UK: trade, migration, labour market en regulations are the main drivers that could be affected by Brexit.
CRBE also checked with owners and tenants how they look at brexit and how concerned they are about the Brexit effect. The authors of the study have 4 main conclusions:
- 2018 will eb a crucial year for the Brexit negotiations, but the impact on Real Estate will not be fundamental
- Migration will be getting more difficult. The effect on the housing market is defficult to calulate
- The office market in London will see some effects of shrinking head quarters
- The sector is less worried today then in 2016 that Brexit may have a negative effect on prices.
The report unfortunately does not discuss the situation of the UK pound. The exchange rate has dropped around 10% since the referendum and is hoovering between 1.10 en 1.15€. A lot of Brexit uncertainty is priced into the exchange rate, making it a lot more attractive for foreigners to buy UK real estate. The invest amount is lower, but also, there is a significant upward risk that in the next few years the Pound will recover when the uncertainty disappears.
You can download the report here.