In the lead up to the impending European Referendum, economists are predicting that real estate investments in London will be affected if Britain leaves the European Union (Brexit), particularly Malaysian investors, being the third largest Asian investment block in the British property market in 2014-2015.
This is further compounded by negative speculation surrounding the significant drop in value of the pound sterling and investors taking a wait-and-see approach. Allianz SE chief economist Michael Heise predicts a 20 per cent drop in the pound, although it is very hard to quantify.
He agrees that it would be substantial, maybe 10 per cent, maybe 15 per cent to 20 per cent, which will hurt the value of real estate investments in London. The real estate market on the whole might be hit by a Brexit move because many investors would probably wait to see how the British government will handle renegotiations and so on.
However, according to a leading real estate consultancy marketing foreign properties to Malaysian investors, Cornerstone International Properties, Brexit offers a number of advantages to investors.
“The Brexit uncertainty presents great buying opportunities especially for buyers from countries with weak exchange rates, for example, Malaysia,” said its director Virata Thaivasigamony.
“In this short term, there are amazing gains for investors as the weaker pound has worked to our advantage,” he said, adding that Britain has always enjoyed a strong and stable economy while London has been a leading global financial centre even before the EU was formed.
Virata is confident that UK will regain its economic and political strength in due course.
“If Brexit occurs, there will be a period of uncertainty and the pound will take a beating. As a result, the UK will be ‘on sale’. Again this is advantageous to investors, particularly those investing in UK student property because UK education will remain strong regardless of Brexit.
“Malaysians and other foreigners including those from the EU will not stop sending their children to study in the UK – people still want a degree from a UK university,” he added.
Meanwhile, a survey by Jones Lang LaSalle (JLL) revealed that a significant number of UK investors remained confident of the student accommodation sector.
“With demand in purpose-built student accommodation superseding supply, the student accommodation market will be more resilient to Brexit than other commercial properties even as the demand for UK education remains unabated,” it reported.