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Brexit would dampen prospects for UK property sector, says new report

Andy Walker
07 April 2016
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EU referendum

A decision by Britain to exit the EU would dampen prospects for the UK property sector, with commercial property, especially in London, being hardest hit, says a new report released today.

The report, Brexit And The Risks For UK Real Estate, from Standard & Poor's Ratings Service, claims that ongoing uncertainty over the EU referendum is having a negative effect on the sector and that an out vote in June would dampen the market further.

"Uncertainty leading up to the 23 June vote is likely to have a somewhat paralysing effect on investor decisions on UK real estate purchases," said Standard & Poor's credit analyst Marie-Aude Vialle. "Should the country decide in favor of a Brexit, prolonged uncertainty during the subsequent exit negotiations may turn investor sentiment more negative," Vialle claimed. 

A vote for Brexit could potentially reverse the significant boost to real estate asset values that the UK and London in particular has experienced in recent years, the report says. Added to this, the report goes on, financial services firms, already under pressure to contain costs, may find an additional reason to reduce office space in London.

Standard & Poor say that they consider the risks to the property sector of a Brexit “may be most pronounced in the commercial property sector, particularly in the office segment, more than in retail and logistics. We also think the effects will be more concentrated in London than other parts of the UK. Within the capital, the City of London would be hardest hit because of a high concentration of international financial services firms.”

Overall, while conceding that the precise impact of Brexit is difficult to gauge, should it occur, Standard & Poor believe it could have negative consequences for UK property with the long-term impact depending on how any EU exit is negotiated. “Nonetheless the potential negotiation uncertainty could add to capital market volatility and create negative sentiment for real estate investment,” the report claims.

If you would like to contact Andy Walker about this, or any other story, please email awalker@infrastructure-intelligence.com.

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Comments

More Project Fear. As this article concedes "the precise impact of Brexit is difficult to gauge", so this is another empty statement by the Remain campaigners, which indicates they cannot find any decent arguments to support their cause. With 400 plus tall building approved or in the pipeline for London it hardly seems that there is a chance of the commercial property market collapsing. In fact the problems are likely to be in other parts of Europe as their economies fail to perform without the UK providing a crutch. If Brexit leads to a fall in the number of people chasing accommodation and a consequent fall in accommodation prices and rents this is hardly a bad thing for the young people being priced out of homes - a plus for Brexit. However, I feel that leaving the EU, so we can shed its unnecessary regulation which adversely affects many SMEs, is likely to energise the UK economy and result in London becoming even more successful on a worldwide basis and THE PLACE to do business. In addition Brexit means we can avoid the undemocratic EU Parliament which gives 8.6 million Londoners 8 MEPs and 430,000 Maltese 6 MEPs. That is a fact not an opinion.
Submitted by Neil Glover on 8 Apr 2016.
I agree that this is an empty and frankly light weight piece from Standard and Poors . What is inclined to wonder whether their crystal ball is worth much. I would rather look towards the massive release of energy and purpose released by a Brexit vote on June 23rd . It is so depressing to see the project fear continuing to spew out such pointless and poorly substantiated arguments for remaining in. We have always had a different commercial property market to that existing in most parts of the EU and our inward investment for outside the EU, from the Middle East and the U.S., now China will surely be boosted further not diminished.
Submitted by Nicholas Finney on 11 Apr 2016.
More negative and vacuous comments from the 'Leave' campaign! Don't they have any facts to back up their assertions? To say that a reduction in employment and population would relieve the housing crisis, so that is a reason for leaving the EU, is utterly stupid -let's cut off our nose to spite our face! As far as the office market is concerned, if user demand is reduced by people being relocated to other countries by international banks and companies that are not run from the UK, that is not going to improve investment demand in our market - obviously it will have the opposite effect. The 'Leave' campaign seems to think that all Red Tape will by magic be removed from SMEs if we leave the EU, but most Red Tape is from Whitehall, which is in reality no more directly accessible to the UK voter than the Brussels bureaucracy, which is actually small by comparison; and to trade with the EU, we will have to follow the current rules anyway, although we will no longer have a vote there. Please could the 'Leave' campaign return to Planet Earth - if they have any arguments to make, let's see them backed up by facts rather than being bare assertions based only on wishful thinking. No wonder the younger generations want to stay in the EU if this is all that the old folks can come up with as a reason for leaving.
Submitted by Richard Linnell on 11 Apr 2016.

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