Brexit: Impact on U.K. Real Estate for Asian Investors

Prime UK Property

Prime UK Property

In the wake of the British referendum vote, and in view of the large Asian interest, global real estate consultancy and services firm Knight Frank has been quick to issue a commentary on the U.K. property market.

For both residential and commercial property Knight Frank says there will be short-term market volatility and in selective instances, pricing could come under pressure.

However, also for both residential and commercial property, the long- term market dynamics remain unchanged. Low supply will continue to be a day-to-day market reality.  

Prime UK Residential

There is no doubt that the vote in favour of Brexit will generate a period of renewed uncertainty in the prime London residential market. Some demand, especially from investors, will be delayed and in some cases redirected to other markets – although the significance of these trends should not be overstated.

Demand for prime London property rests on a wide range of drivers – most of which are unaffected by the referendum decision: the scale of London’s business cluster, depth of skills, education, lifestyle and language. It is not easy to identify an obvious alternative destination for investors despite short- term nervousness.

“While we are entering a period of renewed uncertainty in the UK and London market, ongoing issues around EU and especially Eurozone stability, which will be highlighted in the run up to French and German elections, are likely to counter this risk and shore-up London’s safe haven appeal,» said Liam Bailey, Global Head of Research.

Asian Investors

The UK has long been a destination for Asian real estate investors, with the attraction of the strong liquidity, stable governance, transparency and clear title, meaning that investors from China, Hong Kong, Singapore, Malaysia and Thailand have all invested in bricks-and-mortar in the country.

With the decision to exit the European Union, for existing Asian property owners, the fall in the pound will impact the repatriation of any income returns, as well as the gains on any disposal. 

Time to Buy?

The decision, however, could also present a buying opportunity, as the significant drop in the value of the pound, as in 2009, could lead to an uptick of interest by Asian investors, who, over the last few months have adopted a wait-and-see approach to the referendum – and will now see their buying power increase significantly.

«Chinese, Singaporean and Hong Kong investors especially, looking at both residential and commercial properties most likely in London, will be monitoring the market carefully and looking for opportunities to potentially increase their exposure over the coming weeks and months,» added Nicholas Holt, Head of Research for Asia Pacific.

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