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Real-Estate Selloff Hits Pound

As international investors attempt to drop British real-estate assets, the pound continues to fall. The fallout of the Brexit has impacted the pound’s value significantly, and it appears that its descent cannot stop real-estate outflows. Much of Britain is considered prime real estate for international investors, in particular, London. However, now that Britain is leaving the European Union, investors are concerned that London will lose its top-tier property status.

When a local currency falls, foreign investors will flow in and buy up relatively cheaper assets with their currency. However, the pound’s dramatic fall has not made British property more appealing. Although the FTSE has made gains this year, despite the large selloff post-Brexit, property based stocks are performing dismally. British REITs have fallen over 30 percent this year, the lowest point in over two years. In continental Europe, investors are now jumping into German property assets. Currently, the REIT index on the FTSE is 20 percent less compared to the equivalent index in Germany.

To stem these capital outflows, various real-estate funds in Britain have restricted their clients from pulling out assets. However, the mass exodus from real-estate funds cannot be stopped as investors instead sell off shares of real estate investment trusts. Additionally, investors are shorting the pound over fears of serious writedowns on British assets from a weaker pound. Although most of the panic from the Brexit vote has waned, a major transition is taking place in Britain that has the potential to dethrone London as the financial capital of Europe.
Analysts are now looking at German property assets in the wake of the Brexit. Despite subdued markets globally, German property funds are performing above average as investors attempt to leave the UK. London has long been considered the financial capital of Europe, but now the city may lose this status as investors flee for Frankfurt. Although not enough time has passed since the Brexit, and the actual impact of Britain’s withdrawal will not be known for some time, Frankfurt is current enjoying a period of heightened inflows.

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