Keep Calm And Carry On: UK Real Estate Outlook Rosy Despite Brexit Woes

The fear that Brexit will make investors flee the UK is starting to look ill-founded. According to the new Real Estate 360 report from audit, tax and consulting firm RSM, 85% of UK stakeholders are planning to focus their investments on the UK in the next two years.

RSM surveyed real estate business leaders throughout the UK about their predictions for the impending break from the European Union, how they intended to prepare and where they plan to invest. Last year, RSM reported that 42% of UK investors were looking overseas for better returns. Despite a year of political turbulence and the possibility of a no-deal Brexit, the number of UK investors looking to invest abroad has actually fallen slightly.

“The surprising result of the survey was that only 40% of respondents were looking outside the UK for investment opportunities,” said Howard Freedman, head of real estate and construction at RSM. “This indicates not only a willingness to stay on home turf and put money back into the UK economy, but also a strong belief that our property market will stand strong against setbacks such as Brexit.”

The report comes as a comfort to those who have worried that Brexit will dry up wells of local capital. Private real estate investors may be pulling their cash from open-ended funds, but the view from the institutional side looks much rosier.

Almost three-quarters of survey respondents agreed that economic volatility will necessitate more selective decision-making, but only a quarter of respondents said that it will require looking outside of UK markets. A full 32% of respondents said that they will not be considering investing abroad at all.

Stakeholders are also optimistic that foreign investment will hold strong in the face of Brexit. A majority of respondents believe that 30% to 60% of investment in the UK will come from overseas investors. They reported that the largest barrier to global capital is not Brexit, but the tax restrictions on foreign investment.

The only sectors to which investors are demonstrably growing cold are the London and South East office markets, which the report said have become too expensive and offer margins too narrow to spark investors’ interest. But in their place, numerous other markets have arisen to become new frontiers in local and global investment for the UK.

“London is becoming less and less of an economic option for people, and spreading capital further out is looking far more desirable,” Freedman said.

Eric Solomons, real estate partner at RSM, added that whilst London and the South East remain strong, investors seeking value are looking further north, where the costs of living and labour are reduced. Investors expect higher returns in the West Midlands and North West, as well as in Wales and Northern Ireland.

“The North, and in particular Manchester, is seen as a viable investment alternative to London and the South East,” said Ian Taylor, RSM real estate lead partner for the North West.

New sectors such as build to rent are also drawing excitement, as are coworking and co-living spaces.

“These figures show a solidarity with the home side, and that investors and homebuyers are hedging their bets on the UK to ensure our economy and property market doesn’t see the same fallout as it has done in previous years,” Freedman said.

For more details, download the full report here.

This feature was produced in collaboration between Bisnow Branded Content and RSM UK. Bisnow news staff was not involved in the production of this content.