As polling results became official on June 24, UK citizens voted to leave the EU, edging out those who wished to remain with 52% of the vote.
Since the official numbers, there’s been massive political and economic change in Britain, from the resignation of Prime Minister David Cameron to the British pound dropping to its lowest levels in 31 years.
While the New York Times reports that the decision won’t be effectual for about two years, businesses and their employees are unsure of how this decision could impact the future of their companies, with the hospitality sector already in unsure territory.
Real estate has similarly undergone rounds of prediction and speculation, with many industry expert weighing in on the EU referendum effect in both British and American markets. (At least real estate property management software is dependable.)
Still, there’s a lot of confusion out there, so what exactly is everyone saying?
There’s a lot, but to sum it up, “don’t worry… yet.”
Below, I’ll cover the basics of what real estate industry experts are prediction for the future of their respective markets, listing both the pros and cons of the Brexit decision for Britain and America.
British Real Estate Markets
Because of current economic insecurity and uncertainty, London’s spot as the global leader in real estate is on shaky ground. If there’s anything certain, it’s that the real estate market in the U.K. is volatile.
Since the vote, real estate investors have been pulling out of commercial property in the U.K., with CNN Money reporting that “three big asset management firms [Standard Life, Aviva Investors, and M&G Investment] have halted trading in real estate investment funds” within 24 hours after the Brexit results. Building companies also faced plummeting stock prices, with some facing a dip as much as 30%, largely due to fears that foreign investors and companies may discontinue their business in the U.K.
On the other hand, London residential real estate jumped 38% the week following the results of the referendum, since the drop in the pound gave many the opportunity to snatch up traditionally expensive real estate at lower prices.
But this sudden surge is expected to dwindle in the following months. Liam Bailey, global head of research for Knight Frank, tells CNBC that he believes, “property markets will slow through July and August.”
American Real Estate Markets
For U.S. real estate, it’s easy to assume there there will be no effects from the decision across the pond. But in such economic stability, the Brexit vote still sends ripples across to the U.S. real estate market.
With London facing a potential dethronement as the global leader of real estate, many American industry experts expect New York City to nuzzle its way into the top spot. Tishman Speyer CEO Rob Speyer explains:
If there is a long-term effect, it will likely be highly positive for New York, as it will make the city even more attractive than it already is to commercial and residential investors. Our public and private sectors have consistently exhibited a determination to accommodate growth by investing to re-create such neighborhoods as the Far West Side, Long Island City and Downtown Brooklyn.
In spite of Speyer’s optimistic analysis, diverging opinions remain. While uncertainty in London could push business and investment over to the States, particularly New York City, this city’s ties in the interconnected global economy may mean that U.S. markets don’t emerge entirely unscathed.
For example, with a possible push towards luxury markets in the U.S., an influx in foreign investors could mean increased competition for commercial real estate in other cities like Los Angeles, Miami, and Washington in addition to New York City.
Still with American cities becoming more attractive, experts are also predicting U.S. home values to rise due to lower mortgage rates.
This doesn’t mean that American homes will be easier for British citizens to purchase, however. Rather, Britons looking for residential U.S. property “would actually cost them £10,000 more,” according to Svenja Gudell, chief economist at Zillow.
How do you think the Brexit decision will affect British and U.S. real estate markets? Let me know in the comments below.
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