Real estate investment likely to surge as Brexit drama recedes

By: Damian Wood
Damian Wood
As an experienced trader, I work for myself managing my own small portfolio and also contributing on several investment news sites.… read more.
on Dec 15, 2019
  • The Thursday Premiership election has sent the UK real estate market on a recovery track.
  • Investors had adopted a protect-and-survive attitude due to the uncertainty that had clouded the property market.
  • Richard Divall, Colliers International’s Head of Cross Border Capital Markets believes that foreign and local investors will now start injecting capital into the UK’s economy following a landslide win by the Conservancy party.

Boris Johnson’s landslide win on Thursday triggered the pound to hit a 12-month high, within the first 20 minutes of the Prime Minister’s victory.

Financial markets are responding to the pro-business Conservative Party victory and the coming to an of the dramatisation of Brexit. Analysts and savvy investors predicted a surged market after the election, and true to that, the real estate sector is beginning to recede.

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The property market had been marred with uncertainty even as both local and international investors’ money kept pent up due to Brexit.

But in the long term, there could be choppy waters ahead. According to market experts, there could a slowdown as Brexit plans become more explicit.

Now that Boris Johnson secured his win, Brexit is likely to sail through. And the result to the UK real estate could be a timely relief.

Market leaders believe the win by the Conservancy party is bound to revive UK’s real estate sector following a year of slowed market activities. Nonetheless, investors are worried that if resolving the relationship between the UK and Europe gets complicated, the surge that is starting to be felt could soon die down, hurting the UK’s economy.

The concluded elections have brought to an end the protect-and-survive attitude that investors had adopted to cope with market uncertainties.

Richard Divall, Colliers International’s Head of Cross Border Capital Markets, said that: “2019 has been an awful year for international investment in UK real estate. Anyone who needed investment committee approval wouldn’t have got it.”.

In a report by Real Capital Analysts, the firm indicated that in the first quarter of this year, UK’s investment volumes dropped 50% compared to last year.

But even with that, the UK real estate market is and was always investment-ready.

Just a few days to the elections, Divall said: “Plenty of investors will be overweight in the eurozone, and the UK looks cheap today.” He said that while referring to German bank Deka Immobilien’s acquisition of 1M SF B&M Bedfordshire warehouse.

“A lot of money will return to the UK. Not all of it, of course, but after a year of low volumes, it will come back in sectors like student housing and residential. And for all those investors chasing yield and return, Europe looks expensive. A lot of money will head to North America, but, if you have a choice between a 4% yield in Warsaw or 3% in Germany or 4.5/5% in London, they want to buy into London because it’s the more liquid market, especially if the predicted global economic slowdown comes to pass,” Divall added.

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