Could Brexit force property investors to exit the UK?
Could Brexit force property investors to exit the UK?
Jittery buyers are signing ‘Brexit clauses’ and heading across the pond
‘Brexit,’ the referendum in which the United Kingdom might vote to leave the European Union, has struck a nerve among property investors worldwide.
In its latest UK Attractiveness Survey, EY blamed a bleaker perception of the UK among foreign direct investors (FDI) on the 23 June referendum.
Only 36 percent of the 440 companies surveyed expect the UK’s FDI prospects to improve in the next three years – the lowest score since 2010.
“It is certainly the case that EY’s research demonstrates that any deterioration in the terms on which UK-based businesses can access the European Single Market, would be a concern for investors,” said Steve Varley, chairman and managing partner for the UK & Ireland at EY.
More: What axing the non-domicile status could mean for UK real estate
Global property consultancy Knight Frank named the referendum as the “primary cause” for a mere 0.1 percent growth in the prime central London market in the year to May. This is the city’s lowest growth rate since October 2009.
Buyers and sellers were wary of “entering unchartered economic and political territory,” Knight Frank added.
Think-tanks seem to agree that Brexit throws into question the geopolitical stability for which the UK is renowned among investors. The Paris-based Organisation for Economic Co-operation and Development (OECD) has downgraded its UK growth forecast for this year and warned that negative repercussions from Brexit could usher a “deep downturn.”
In polls conducted by the Financial Times, 43 percent of British respondents wanted to leave the Union.
More: London remains a solid bet for real estate investors
Meanwhile, London-based law firm Nabarro observed that worried commercial investors were adding “Brexit clauses” to their property deals, per The Guardian.
Brokers across the Atlantic may treat this as opportune time. The Real Deal reported that a growing number of foreign luxury buyers are looking at New York City as a safe harbor, partly because of a recent increase in stamp duty on second-home purchases in the British capital.
Although EY saw a record 1,065 FDI projects last year, ninety percent of that growth went to regions outside of London.
In December 2015, international real estate advisor Savills expected a total turnover of GBP19.4 billion (USD28.13 billion) in central London office investments, with Taiwanese investors accounting for 21 percent of all Asian investments.
London was the number one gateway city among Asian outbound investors last year, according to real estate consultancy CBRE.
Check out our in-depth article on Brexit in Issue no. 136 of Property Report magazine
Source: Property Report