JLL predicts effect of Brexit on UK real estate

“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,” he said.
 “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 JLL’s view of these factors based on expert analysis.

Impacts
 Occupier demand will weaken in line with economic growth and declining business sentiment. The impact on rents may be limited by tight supply, but activity will be adversely hit.
Investor sentiment will deteriorate, further subduing capital flows in the short to medium term.
There is likely to be a negative capital value adjustment over next two years (estimated at up to 10 per cent with yields moving around 50 basis points). London sectors remain most vulnerable to correction given current keen pricing and their multinational occupier base.
The residential market is expected to cool despite lower interest rates, but any correction will be mild, aside from prime London values, which are significantly more exposed.
For property markets, the initial correction may be most severe and 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 and favourable direction of travel is established early on.
Commenting on the impact on the housing market, Adam Challis, head of residential research at JLL, said: “Investors may well identify opportunities in the London housing market over the short term, particularly international purchasers that can benefit from the currency arbitrage that has opened up by a weaker pound sterling.”