Cutting Through the Hype: Some Post-Brexit UK Property Market Facts and Figures
In the six weeks following the momentous and unexpected decision by the UK electorate on 23 June, we have seen political leaders fall, stock markets tank, sterling plummet, and several open-ended property funds freeze redemption rights.
Many seasoned property investors would question the wisdom of open-ended retail property funds that allow forced sales of quality assets in moments of panic, but that is another question for another day.
The FT has reported that more than £650m of commercial property deals in the City of London have collapsed post Brexit, and Cushman & Wakefield has reported that commercial property investment volumes were down 30% year on year in Q1 2016, although it is important to note that this was pre-Brexit.
Societe Generale has warned that London prices could drop by 30% if UK companies lose regulatory passporting permissions that allow them to conduct financial services business across Europe.
On the other hand, the following has happened in the six weeks following Brexit:
A record breaking rent of over £100 per sq ft has been reported at the Cheesegrater.
Amazon is set to sign Europe’s largest logistics pre-let, a 2.2m sq ft building in East London.
Barnet Council and several development partners have agreed a £4bn regeneration scheme at Brent Cross in Northwest London.
And Bloomberg reports:
Evidence of a meltdown in valuations and investor demand just isn’t there yet. For a market said to be in the eye of the hurricane, the prices and deals being struck actually look reassuring.
Aberdeen Asset Management this week sold a building on Oxford Street, the U.K.’s busiest shopping thoroughfare, after cutting the asking price by 15 percent. At first glance, that reduction looks painful.
But this is an asset sold by one of several property funds that had to freeze redemptions after investors rushed for the exits earlier this month. For a building sold in a matter of weeks in the middle of a liquidity crunch, it’s not a bad result.
And for other companies that aren’t under that kind of pressure, such as British Land, the terms being struck on property deals have barely budged since the referendum. British Land this month sold a department store — again on Oxford Street — at a yield of about 2.75 percent, in line with pre-Brexit-vote yields.
The FTSE has recovered from its post-Brexit lows and US equity markets are at all-time highs.
Sterling remains weak by any standard and represents a buying opportunity for foreign investors taking a long-term view that London will remain a world city and financial capital for the foreseeable future.
Corporation tax is headed for a reduction to 17%, among the lowest in the industrialised world. Surely this will attract many businesses to the UK for many years to come.
A cloud of economic uncertainty will remain over the UK for some time to come, but 2008 and a time for panic this is not.
Shrewd investors will find opportunity in all market conditions.
Property Crowd offers UK property crowdfunding investments that seek to take advantage of these opportunities.