BREXIT Hurting UK Property Market

London, June 24 Britain’s decision to quit the European Union led to sharp falls in property-related stocks on Friday on the expectation the recent cooling of both residential and commercial markets, a major driving force of the economy for years, will deepen.

‘Remain’ campaigners had warned house prices could fall if Britain left the European Union as a result of Thursday’s referendum.

“We have seen a significant slowdown in the volume of transactions in the run up to the referendum and it’s likely that will continue,” said Andy Pyle, UK head of real estate at KPMG.

Big variations across regions and different property assets are expected.

“At its simplest, Brexit impacts commercial real estate if it reduces GDP growth, impacting long-tess srm employment growth and future demand for office space,” said analysts at UBS in a note.

KPMG said it would expect companies’ appetite to enter new property leases and increase their liabilities would diminish, particularly if Britain’s departure from the EU weakens London’s financial district.

“Given the potential for banks to need to transfer business undertaken in London into the euro zone, 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.”

Analysts at UBS agreed that the London office market looked particularly vulnerable because of its exposure to financial tenants. They calculated that British Land has the highest exposure to financial tenants of those stocks it covers.

The FTSE 350 Real Estate index, which had risen 8 percent in 2015, was down 15 percent on Friday. Shares in British Land plunged by nearly 20 percent while Land Securities was down around 17 percent.

Marino Valensise, head of multi asset & income at Baring Asset Management, said his firm had been cutting its exposure to UK property assets as well as British shares in general ahead of the vote and was considering reducing it further.

UBS said property stocks could yet fall another 10-20 percent.

Source -Reuters