The stunning General Election that Theresa May called for the UK may have terrified the Labour Party but only galvanized European investors who shunned London’s commercial property since Brexit.
European investors are flocking back as the weak pound cuts prices and electoral uncertainty on the continent makes the U.K. seem a good place for buyers to spread their bets.
Investors from Europe plowed £1.7 billion ($2.2 billion) into the capital’s offices, shops and warehouses this year through April 18, accounting for 31 percent of the market, according to Savills Plc. That’s up from 824 million pounds and 14 percent in the same period of 2016.
Opinion polls suggest Prime Minister Theresa May’s Conservatives will significantly boost their parliamentary majority at the election called for June, helping the premier negotiate a better settlement as Britain leaves the European Union. Financial and property markets love to predict the future and this shock election is being seen as a positive for the UK economy at large.
“If anything, the snap election call in the U.K. decreases uncertainty regarding property values in London,” said David Hutchings, the head of European strategy for property broker Cushman & Wakefield Inc. “If, as expected, May comes out stronger and in a better position to negotiate with the EU, our Brexit will be softer.”
As well as the “comparative uncertainty” on the continent, pricing is a decisive factor, and the pound’s 10 percent drop versus the euro since the Brexit vote means London is no longer the “most expensive place in the world,” said Mat Oakley, the head of commercial research at Savills in London. “Investors know where the U.K. is now with Brexit.”
“The commercial-property market in London is 10 times the size of Frankfurt and nobody, not tenants nor investors, want to leave,” said Ronald Dickerman, founder of Madison International Reality LLC, an investor in the development that houses the London Stock Exchange.
“Brexit just made London an even better place to invest.”
Paris, by contrast, has seen a “notable drop-off” in commercial-property deals during the election campaign, and activity won’t pick up again until afterward, according to David Ironside, chief investment officer for continental Europe at LaSalle Asset Management, which overseas $58 billion.
In a starkly contradicting view, David Cox, CEO of the letting agents’ group ARLA Propertymark and Mark Hayward, CEO of the estate agents’ group NAEA Propertymark, said: “All political parties need to put housing front and centre in their election manifestos.
“The country is rapidly moving towards crisis point, where a chronic shortage of housing has become unsustainable. Rather than trying to look at individual issues, it’s time to take a holistic view of housing policy.”
For Trevor Abrahmsohn, MD of ‘super-prime’ luxury estate agents Glentree International, the turmoil of an early election is preferable to uncertainty over domestic policy later on, when Britain will be embroiled in Brexit negotiations.
“As is usual before a momentous event there will be a great deal of ‘wall sitting’ as people will forestall making decisions to move home, until after the results are known following the election,” he said.
DMZ thinks that house prices will rise regardless of who is in power because of limited housing supply. Theresa May needs a popular mandate and the general election will give her that. We expect the Tory majority will increase in the House of Commons at the expense of Labour seats, stamping May’s authority and decreasing uncertainty going into negotiations regarding the UK’s exit from the EU. Markets in the UK dislike uncertainty and crave certainty. This certainty will positively impact on the UK property market, resulting in increased sales, increased prices or at least no decreases. UK and worldwide property investors will continue to make the UK a primary market for them to invest in.
Property priced less than £1 million are still selling well and in some cases we’re seeing price increases. However, the pricing on more expensive properties, over £1.5 million, is down compared to pre-April 2016, and currently there doesn’t seem to be much confidence that this end of the market will get any better in the short to medium term. The only way to stimulate the higher end of the market is to drop the additional 3% Stamp duty, which has grounded the property market at the top end to a halt. This would clear the way for first-time buyers at a realistic entry point while maintaining some traction at the higher end of the market, which London is renowned for.