Post Brexit Prospects For Property Investments

In what will most likely go down in history as one of the most controversial weeks in politics, the Brexit vote is already making significant waves throughout the global economy. With a period of uncertainty ahead, it is unsurprising that there will be a lack of confidence in the UK economy. As business opened on the 24th June, the pound plummeted to a 31- year all time low, and by the end of this notorious Friday, $2.08trn had been wiped off global shares. The ripples continued throughout the globe with Wall Street suffering the biggest one-day loss in 6 months, Japan’s Nikkei index experiencing its biggest fall since the Fukushima disaster of 2011 and France’s CAC tumbling by 8%. Property has enjoyed, for a prolonged period, the benefits of appealing to investors for many reasons; be it buy to let landlords, gentrification and student lettings, or global firms seeking property within the Capital to utilise as way to gain a passport into the EU. Following the Brexit decision, and the announcement by Moody’s lowering the credit outlook on UK, what are the future prospects for property investments and growth?

Riding Out The Storm For Future Success

Prior to the EU Referendum economists and global business consultants warned of the potential impact of a Leave vote on property within the Capital. Property in London has, in recent years, been acquired by globally operated businesses, looking to conduct relations within Europe. Using London as a base, they were able to passport into the EU, a benefit that will now no longer be an option. In addition to the potential mass vacation of these properties, currently occupied by businesses, it has become apparent that property sales that were due to take place, are collapsing amidst an economic landscape lacking confidence in the future.

During 2015, Singaporeans were the top Asian buyers of UK commercial property*, however last week, one of Singapore’s largest lenders, UOB, suspended their loan programme for London properties. In a statement to the BBC, UOB stated:

“We will temporarily stop receiving foreign property loan applications for London properties.”

“As the aftermath of the UK referendum is still unfolding and given the uncertainties, we need to ensure our customers are cautious with their London property investments.”

At present, the other lenders in Singapore, DBS and OCBC bank continue to offer finance but urge their customers to be cautious.

Any investment comes with a degree of risk, but when there is confidence in the market and clear economic policy in action, it is more likely that people will invest more openly. Clearly, at present, as reiterated by UOB, the market sits in a vulnerable position where, whether Article 50 is triggered or not, the next 2 – 4 years are a complete unknown. For private and corporate property investors, the concerns over relocation of offices in the financial sector and a yet unknown exit strategy, influencing public spending and the demand for property for people within the UK, have created cause for re-evaluation. As a result, more than £650 million of commercial property deals in London have collapsed since 23rd June. Amongst these high profile transactions, was Germany’s Union Fund, who had been in negotiation to buy Cannon Place, the £20m purchase of 1 Chancery Lane by a private Spanish investor, and the £190m purchase of the London headquarters of law firm Eversheds by KanAm, a German real estate investor. For private property purchases, there has been a similar trend seen with overseas buyers pulling out of sales and house prices starting to drop, without interested buyers. The UK housing and commercial property market could potentially suffer these impacts of uncertainty for some time to come.

Simon Calton, CEO of Rycal Investment group advises “The U.S. is still the safest place, invest in U.S. dollars … diversify and look for a long-term strategy.” Carlton James Skywatch Inn Ltd is an investment opportunity presented by the group that is operated exclusively between the UK and the USA, avoiding any direct impact from the trade and exit negotiations taking place between the UK and the EU. In the initial fallout of the referendum, the dollar strengthened against the pound, giving a greater confidence in investment in the currency. This exciting opportunity from Carlton James offers clients the chance to invest in up and coming, high demand areas in the US, where there is an overwhelming requirement for new hospitality. In addition, Carlton James ensure the areas chosen for these new hospitality developments also have additional ‘value generators’, for example proximity to shopping malls, oil fields, airports, amongst others, and with the added security of the group’s strategic structure to back the investments against their growing site portfolio. Although a return can never be guaranteed, there is little doubt that the innovative scheme offers investors great opportunities to profit.

The foreseeable future for the UK economy is, without doubt, uncertain, albeit less negative than was first suggested immediately after the announcement of the Brexit result. With confidence in investing within the UK currently very low, markets in the US could begin to see a surge in sales, and so it may be wise for investors to consider. At a time when the next steps are not yet clear, diversifying and seeking new opportunities further afield while the EU negotiations unfold, could well be the best advice for anyone needing to invest at this time.