Brexit Briefing: The Impact on Global Real Estate

Global investors will seek sound income streams and concentrate on property fundamentals


■  Risk & World markets: Uncertainty in the wake of Britain’s EU referendum has changed the balance and perception of world risk, affecting all global markets to varying degrees. This has changed the prospects for real estate markets asymmetrically. Real Estate has characteristics which may be increasingly sought-after in uncertain times so caution on REITs and funds may be tempered by increased appetite for direct property ownership in particular sectors and jurisdictions.

■  Real Estate characteristics: Negative short bond yields in some countries and very low income returns in many means that income-producing real estate should be increasingly sought after.

 European real estate: European cities are among those showing the highest net effective income returns over and above local 10-year government bond rates. This suggests that prices have not yet reached a cyclical high and also that these markets are likely to show the highest income returns if rents remain stable or grow.

■  Safe havens and income streams: Real estate in stable jurisdictions with good title still offer investors a way to store their wealth amidst turbulent markets. Rental premiums over gilt yields may be viewed as a bonus by some over and above this safe haven status so temporary fluctuations in capital values have little relevance to these longer-term-income investors.

■  Global appetite for real estate: While short to medium term worries on economic performance may keep Sterling and Euro currencies low, this will present buying opportunities, especially where debt availability is not an issue. Underlying fundamentals of supply, demand and rental growth will become key determinants of success.

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