Andy Pyle, UK head of real estate at KPMG, comments on the potential impact of the UK’s exit from the EU on the real estate market:
“Until the dust starts to settle, the impact of the UK’s exit from the EU on the real estate market is difficult to determine and uncertainty will prevail.
“Whilst this uncertainty over timing and the UK’s future trading relationship with the EU remains, we expect the majority of UK companies will focus their attention on assessing the impact on their business. We would expect their appetite to enter new property leases and increase their liabilities would diminish, leading to a general dip in occupier demand. It’s also reasonable to expect that, while there could be an impact across the UK as a whole, there will be significant variations in that impact across the regions and in different property asset classes. Given the potential for banks to need to transfer business undertaken in London into the Eurozone, we could see a particular decline in London’s dominant position as Europe’s leading financial and business centre, which would impact real estate demand in the City in particular.
“Similarly, we would expect investors will carefully assess the impact before making major decisions as to whether to buy or sell property. We have seen a significant slow-down in the volume of transactions in the run up to the referendum and it’s likely that will continue. This is consistent with what international investors told us when we surveyed them in March*, but the majority also told us they expected to continue to invest in the UK going forward, regardless of whether the UK left the EU.
“Should sterling go into tailspin in the next few days, weeks and months, international investors playing the long game are more likely to jump on what could be a once in a lifetime chance to get hold of ‘cheap’ property. While this won’t be limited to real estate, the enduring rule of law and objectivity of private property protection in the UK, will make investing at a low point in the market very attractive. Given the strength of the UK property market and its track record of bouncing back, it’s likely to be seen as a relatively safe bet, despite currency turmoil.
“And of course, there is a consideration over how migration will be dealt with – our construction industry relies heavily on EU workers. Should rules change to limit those workers, we will see an even bigger skills deficit in the industry, with a knock on effect on both the commercial and residential property markets. While that may be a longer term concern, given the time any changes to migration rules are likely to take, it’s a distinct possibility.
“While the actual impact will take time to play out, what’s important is that the Government and the industry recognises that as terms are defined and agreed, it is vital to maintain the attractiveness of the UK as a place to invest in property. Outside of those involved directly in the market, the wider UK economy has significant exposure to the real estate market – just think about the property investments made by our pension funds.”
Notes to editors:
*KPMG research conducted in March 2016 of 25 global real estate investors with assets under management of over $400bn, revealed that:
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