If the polls are correct for the UK General Election on 8 June, Theresa May and the Conservative Party will win by a landslide. It’s assumed that a win will allow the Conservatives to negotiate a softer Brexit than first assumed.
While the polls may be showing favour for the Tories, we all know that they’re liable to disruption. Recent political shifts have shown that polls cannot be relied on when predicting outcomes and no one will really know what will happen until the results come in.
Transitional deal looks likely
However, either way investors in UK property are showing signs that they think that some kind of transitional deal is most likely when it comes to Brexit. There has been talk by experts about a ‘transitional’ deal with much of the EU’s regulation actually still in place. This would be a very different outcome than the ‘hard Brexit’.
It seems that there is growing admittance that separating the UK from the EU is hardly simple, and that there are perhaps decades worth of complications ahead. This suggests that the final Brexit ‘deal’ we see will be very much in name rather than reality.
There are a lot of issues arising from Brexit that will not only take years to settle, but may need to end in a status quo. For example, most undersea telecom cables from Europe to North America run next to the west of England, and these will have to stay. At the moment 80 per cent of trading involving European currency happens in London. There are also many UK manufacturers who use most component parts from the EU. It seems that many of these stakeholders won’t want a seismic change.
Teresa May, the UK’s Prime Minister said in the letter that invoked Article 50 (in effect officially marking the start of the UK’s withdrawal from the EU) that “… people and businesses in both the UK and the EU would benefit from implementation periods to adjust in a smooth and orderly way to new arrangements.”
In other words, there is acknowledgement that an interim deal is necessary. If the UK is willing to remain regulated by the EU then it looks like Brexit may not be the damaging force that was initially feared.
Sales rebounding since referendum
Just after the referendum in June 2016, office investment sales fell to £3.1 billion (Dh14.7 billion) according to Property Data, showing a huge detrimental effect on commercial property. However, in Q4 2016, sales went back up to £4.6 billion. This rebound increased further to £5.7 billion in Q1 2017.
Investors were returning to market even as ministers were confusing the world with hard Brexit speeches in the Commons. However, this remarkable recovery should be seen in a wider context.
There is a different atmosphere surrounding property investment. This is shown in the US where markets have evidently decided to rise above all the noise from the White House and continue to focus on the fundamentals of the economy. In a similar way, the UK has moved towards a period of normalisation following unprecedented political upheaval. This is being shown within UK commercial property, particularly with foreign investment. Buyers and investors are looking ahead and focusing on long term returns, rather than what’s happening in politics today. A consensus that we are likely moving towards a softer Brexit will continue to encourage this trade.
Samir Salya
Samir Salya is the Chairman of Reign Holdings and is involved in real estate and construction within the UAE and UK. Samir holds over 20 years of experience in executive management, business expansion, performance improvement, sales and marketing.