BREXIT – Good or Bad for property?
I was asked, again, the other day whether I thought that property values are likely to be affected by the Brexit result.
All property, that is land and the built environment means the entire land mass of the UK so the question is a big one.
“Brexit result”; well we don’t have one yet but three years into the process, two prime ministers, thirteen applicants for the job (at the time of writing) and the likelihood of a further referendum does bring with it a degree of uncertainty.
But if we are to believe the journalists (TV particularly) and the politicians generally, the UK will be a worse place to be following the eventual result. Confused.com have not yet offered a one stop shop to solve the problem. However, speaking to those who actually create the wealth of the country rather than those who spend it or comment on its failings, most are factoring in either scenario. It is certainly the case that some decisions are being deferred but others are not. In our advice to clients we remain cautious but unlike 2008, the Lehman Brothers cliff edge moment, this is no cliff edge moment. The markets three years on are mature, the banks are in a strong position having been stress tested regularly, interest rates remain low and there is a large amount of cash been held in companies. We are living and breathing the uncertainty of the Brexit crisis.
There are parts of the commercial property market where values have fallen, particularly high street shops but that has more to do with other factors such as internet shopping rather than Brexit.
The industrial occupier market has shown very little signs of a slow-down. Indeed, take up nationally has remained robust post June 2016. 2016 turned out to be a record year falling just short of 100million sq.ft (up 2% on 2015) and up 10% on the ten year average of 88.6million sq.ft with 2017 remaining strong and little let up in 2018 (Date: Brexit Property Impacts September 2018).
Some institutional investors have temporarily left the market but most continue to hold their stock (even when vacant) despite an appetite from private property companies and owner managed businesses to seek to persuade them to sell.
The follow up question which I also get is; I have a substantial amount to invest, should I hold off and wait for the confusion and fall in values following Brexit?
With over 40 years in the business I have seen many cyclical changes with recession and recoveries for many varied reasons. I have never predicted the future performance of markets but what seems obvious to me on this occasion is the abundance of cash seeking a home getting very little interests from the banks. Whilst it is perfectly possible to take the view that which ever way the Brexit result goes values may fall, it is just as reasonable to take the view that either little will change (as its already factored in) or they may be an increase in demand pushing values up.
Whilst every asset class is subject to its own cyclical issues, weaker sterling and the Brexit vote of June 2016 boosted property investment in the UK. With no cliff edge moment to come so far as I can see, my advice would be to know your own investment criteria and make a decision based upon that and the current market as we now find it. If you are a property speculator/trader – good luck.
Mark S Hanson
30 May 2019