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JLL UK CEO & head of Residential research comments on implications of Brexit on UK property market
The vote for Brexit brings a new dawn for Britain, with considerable uncertainty and no real precedent. JLL UK CEO Chris Ireland commented:
"Even if it is effectively 'business as usual' for the UK in terms of trade and legislation until 2018, such a major change will inevitably create uncertainty in the economy and real estate markets. In the event of a well-managed exit these impacts will be largely confined to the UK.
"In the short term we may see a weakening in occupier demand. The impact on rents may be limited by tight supply, but activity will be adversely hit while initial uncertainty about direction and timing continues. Investor sentiment may also remain subdued in the short to medium term. For property markets, the initial correction may be most severe but should be followed by an upturn as opportunities re-emerge in UK core markets and benefits of weak sterling are recognised. Sentiment and relative pricing will be key.
"Much will depend on the speed of negotiation, the wider political picture and whether a clear direction of travel and timetable for an EU exit is established early on."
The following is a summary of our view of these based on expert analysis:
Property market impacts
Commenting on the impact on the housing market, Adam Challis, Head of Residential Research at JLL, said: "The London housing market will feel the effects of the Vote Leave decision more deeply. The interconnected trading relationship between London and the rest of Europe means the implications are more complex. This will exacerbate the uncertainty for London's homeowners. Paradoxically, investors may well identify opportunities in this market over the short-term, particularly international purchasers that can benefit from the currency arbitrage that has opened up by a weaker pound sterling.
"While the focus leading up to the Referendum has been on the UK's international trading relationships, we are deeply concerned that domestic politics will now be the key risk to the housing market. Regardless of the Referendum outcome, the UK has a deep housing supply imbalance and concerted attention from politicians to deliver credible, lasting solutions to the supply conundrum is desperately needed. Protracted infighting within the UK's political parties will only harm the UK economy and any chance of a timely recovery from the expected economic slowdown."