After the much high voltage discussions that had engulfed most of European media channels on whether UK should remain or leave EU- the cat is finally out of the bag. The result of the referendum has been that, UK will no more part of the EU, after being its integral part of the past 43 years. Keeping aside the emotional avalanches, which often such exits erupt, the market of think tanks & expert opinion makers are once again hyperactive to prophesize “now what lies ahead for UK”. Will there be a significant economic impact & if yes, at what magnitude are the tremors expected to be felt in the times to come.
As usual the opinion fabricating machineries are split with opinions ranging from the apparent implosion of the UK’s economy post exit to enabling the country to chart out its own growth plan in the absence of regional obligations.
One key component of this economic debate comprises of how will the UK’s real estate industry going to behave in the years to come, as the dynamics of real estate is closely interlinked with overall economic outlook.
As a matter of fact, it cannot be discounted that with UK going out of EU, the trade & commerce are going to be affected & this might push the economic outlook go off the pedestal in the mid to short run. According to estimations by the Credit Suisse, the estimated loss could be in tune of the total GDP shrinking by 1-3% annually. Although the estimates by the government agencies is lesser at around 0.6%. Likewise, cross border trade will also be affected, further making the economy shrink. A plummeting economy will have direct impact on the real estate industry in the form of reduction in capital value as well as transaction numbers.
The impact should be seen more in London as the city is touted as the financial capital of EU. In other parts as well negative impacts might be felt primarily emanating out of the slowdown in the exports of the local industries due to the trade restrictions.
In fact thanks to the uncertainties regarding UK’s future in EU in the recent times, the negative impacts have been already felt in the market resulting into lesser transaction & correction of prices. In the present world which is yet to emerge completely emerge from the shadows of the economic recessions, business tend to adopt a more conservative approach during uncertain times. Under such situation major events like, BREXIT make investors & buyers to rethink their decisions & try hold on before the picture gets clearer.
Conclusion
During the run up to the referendum, the impacts have not been very positive with prices corrections observed in London in tune of 5-7%. Similar subdued sentiments are expected to continue in the near future. There are possibilities that with London no more being the epicenter of Europe & parallel cities such as Paris & Frankfurt might emerge. The shift might also result in moving out of some of the commercial headquarters from the London. Under such a circumstance, Paris with a large inventory of office space might be a natural gainer. However, in the longer term only time will tell what impact will it entail on the country’s real estate market.
