The British news has been dominated by the prospect of Brexit in recent times, with the conflict between opposing political factions driving the headlines. Despite the fact that there is only a 25% chance of Britain voting to leave, there is a growing fervour among anti-EU politicians throughout the UK.
This is creating significant momentum against Prime Minister David Cameron, who is known to favour staying in the EU so long as the terms of membership can be renegotiated. With a satisfactory deal beginning to look unlikely, it may be time consider the realistic impact of Brexit on the UK.Interestingly, it is the impact on the property market that is most concerning for economic experts. This has long been the lifeblood of the British economy, as it has driven the widespread recovery that has taken place since the great recession. Shares in the sector have been hit hard by talk of a British exit from the EU, however, as market leaders report significant losses amid uncertainty and a lack of clarity about Britain’s financial strength as an independent entity.
Brexit and the growing uncertainty surrounding Britain’s future has already wiped an estimated £4 billion of FTSE 350 real estate investment trusts since the start of 2016, with the shares of commercial market leaders such as British Land and Land Securities having fallen by 14% and 11% respectively. The impact has been worse in high value regions such as London’s West-end, as international investors are also increasingly reluctant to commit to luxury property as a viable asset class in the current climate.
This has created something of a sell-off in the capital and its surrounding regions, both in terms of shares and physical real estate. Many of you have probably considered selling your property in the current climate, particularly with a global recession also expected to take hold towards the end of 2015. While this would increase the influx of homes onto the market, we can also expect demand to fall as potential buyers shelve their plans until the economy has stabilised.
While it is unfair to blame Brexit entirely for the current state of affairs (especially given the level of global economic tumult) the uncertainty created by this has scarcely helped matters. It has created a volatile and unpredictable market, where it is almost impossible for home-owners and investors to estimate even short-gains.
This will most likely lead to a period of inactivity in the build-up to the June referendum, as people are unlikely to risk their capital in the property market regardless of their goals and aspirations. As a result of this, share prices among UK real estate firms will also continue to plummet, creating a huge trough before a final decision is made by British citizens.