Brexit: committee member views

It is a truism that markets dislike uncertainty and that is particularly true of the commercial property market, where projects are often planned over many years based on long-term projections. The current market sentiment is gloomy, although many feel that the London market was ready for a correction which would have happened with or without Brexit. We have seen a number of large transactions fall through either because buyers prefer to keep liquidity in times of uncertainty (‘in a slump, cash is king’), or because prices agreed in the spring now look too high, or in one case simply because a large Belgian investor buying a portfolio of properties felt that England no longer seemed to be a place where they would be welcome. Undoubtedly, deals will still be done, but my feeling is that for the next couple of years the level of activity in commercial property will be significantly reduced.

It will be some time before the real implications of Brexit for the legal profession and the wider economy are known. Uncertainty is generally the killer for all of us, but at least domestic politics is starting to settle down with a new prime minister and team in place. I think, inevitably, we will adapt to this new world, even if it wasn’t necessarily of our choosing!

For those firms (including my own) working within the prime central London market, the effects of Brexit have been swift and certain. In the initial weeks following the referendum we have seen many foreign buyers (the lifeblood of the central London market) simply withdraw because of the economic uncertainties surrounding the UK. It is my view that the London market does need to correct slightly with a downward shift in prices, but this is likely to be short-term as London still remains a very popular centre for residential property investment. With a general shortage of property on the market both in London and the provinces, I do not believe that we will see a large drop in prices as demand is still strong. It seems to me that we have to remain positive about the future and not talk ourselves into a recession which might easily happen.

My initial sense was of disbelief and fear that there may be a serious impact on the economy resulting in a downturn in business. I then had the realisation that in the short-term there is going to be little impact on the general economy and likely to be little impact on the housing market in my part of the country. Reports of interest rate cuts are welcome because this is likely to encourage more activity in the housing market. The initial fear has subsided and the volume of new property work, particularly commercial, is encouraging.

I write this about a month after the vote to leave the EU, and as a residential conveyancer ‘Brexit’ has become a word that is now added to a sentence to justify a decision that a client is making – be that a reduced offer, pulling out, selling without buying and son on. The reality is that no one really knows the true impact, but it has become an instant excuse, another ‘soundbite’. Hopefully, by the time my comments are published we will truly be able to see where the housing market is but, if the previously published statistics are correct, we still need to build houses for our growing population, and the ‘national pastime’ of moving house is likely to continue as long as mortgages are available and with the Bank of England reducing the base rate to 0.25 per cent lenders are already reducing the cost of borrowing. So for the summer of 2016, Brexit can be added to the weather, tennis, football and the Olympics as another variable in the home-moving market.