While that level of pessimism isn’t universally shared, the EU referendum and its aftermath have been striking fear in Britain’s real estate markets.
Britain has voted to leave the European Union. Prime Minister David Cameron has resigned. The Bank of England looks set to add more stimulus to the economy to avoid a recession.
While that level of pessimism isn’t universally shared, the EU referendum and its aftermath have been striking fear in Britain’s real estate markets. The market has been inflated for years by economic growth and speculation, including by foreign investors looking for a piece of the wealth and stability of London. Now Britain’s vote to leave the EU has raised concerns about an economic downturn as well as the possibility that some companies might have to move business to mainland Europe to retain access to the EU’s single market.
Those concerns saw investors rush to sell out of British commercial real estate this week. At least six investment firms suspended redemptions in their U.K. commercial real estate funds, and shares of publicly traded builders such as Land Securities Plc and Taylor Wimpey plunged.
Even funds investing in commercial property, among the most popular last year, had started to show vulnerability in the months before the June 23 referendum on leaving the European Union. Withdrawals accelerated as opinion polls turned in favor of the “Leave” campaign, driven by concerns that international companies might shut or scale back London operations even if financial markets and betting odds suggested that Brexit was unlikely.
However, initial reactions suggest the Brexit vote has not as bad an impact as earlier expected.
Sales of prime London real estate jumped 38 percent in the week after the result of the vote, as a slide in the British pound attracted bargain hunters seeking a rare opportunity to buy the city’s property at a discount.
The number of residential real estate sales in London during the last week of June —days after the vote — increased 38 percent compared with the previous week, according to data from Knight Frank. Sales were 29 percent higher than the last week of May, the leading U.K. real estate brokerage said. The company does not give out actual sales numbers.
London has become a global hub for the super rich, with Middle East royals, Russian oligarchs and Asian billionaires buying up townhouses and penthouses. Many saw a buying opportunity as the British pound tumbled roughly 15 percent versus the dollar in the days after Brexit. That decline made property cheaper for dollar-based buyers.
Still, analysts don’t expect the June surge to last through the summer. Data on showings and buyer interest suggests that many plan to stay on the sidelines in coming months, Bailey said. Several banks, including Singapore’s United Overseas Bank, have halted mortgages for London properties. And on a year-over-year basis, sales were down about 10 percent.
While the number of sales in London popped at the end of June, prices continue to fall. Average prices in prime London areas fell by 0.2 percent in June as compared to May. Prices in the prime Chelsea area are down 5.1 percent year-to-date.