Since the Brexit vote was announced last summer, there has been widespread uncertainty about the future of the UK commercial property market. Following the result in June, a number of trading deals fell through, and investors withdrew vast sums of money, resulting in a suspension of trading on property fund assets – totalling £18 billion.
Theresa May’s announced plan to instigate a ‘hard Brexit’ may have removed some doubt surrounding the issue, but how does it impact the market moving forward?
Stephen Crook, commercial property lawyer at Slater and Gordon says, ‘The UK IPD Monthly Property Index rose just 2.8 per cent in 2016, compared to 13.6 per cent in 2015 and 18.6 per cent in 2014. This slump in growth shows that Brexit has had a negative impact on the market, but it’s not quite as bad as it seems.
The demand for property in the UK, especially in London, is still high. Furthermore, the weakness of sterling has made investment in the UK market more attractive to foreign investors. Following the announcement that the UK would be leaving the EU, there has been a string of investments from major institutions.’
This is not to say that the commercial property market will resume the growth experienced during 2014/15 straight away: housebuilders’ share prices are still 15.6 per cent below pre-vote levels, despite dropping 37 per cent in the days following the result, and real estate prices are still 10.6 per cent down from last June.
Although the future has become slightly clearer following May’s announcement, only time will tell. However, it’s certainly a brighter outlook than first presumed last summer.