Real estate market must be a priority as exit vote causes widespread uncertainty

Real estate - a priority as UK exit causes uncertainty

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:

Also on KPMG.com

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.”

Ends

Notes to editors:

*KPMG research conducted in March 2016 of 25 global real estate investors with assets under management of over $400bn, revealed that:

  • Two thirds believed a Brexit would result in less inward investment into UK property and property companies
  • Two thirds said that if the UK voted to leave the EU they would slow down investment into UK property during the period of uncertainty as new terms of engagement with Europe are being worked out
  • Longer term, ie once terms were agreed, just over a third of investors said their own organisation would be less likely to invest in UK property post-Brexit
  • When asked which European countries would be an alternative investment destination, the majority of investors named Germany, followed by France.

For press enquiries please contact

Frances Shennan, Press Office Senior Manager, KPMG: 07584 202794 / frances.shennan@kpmg.co.uk

About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff.  The UK firm recorded a revenue of £1.96 billion in the year ended September 2015. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 174,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such.

Our Brexit coverage has now moved

Our Brexit coverage has now moved

Click on the link below to access our new home for coverage of the UK's decision to leave the EU.

Connect with us

 

Request for proposal

 

Submit

KPMG’s new-look website

KPMG’s new-look website