While Brexit hits UK real es­tate, sen­ti­ment in the EU re­mains pos­i­tive

Financial Mirror (Cyprus) - - FRONT PAGE -

Ac­cord­ing to the lat­est RICS Global Com­mer­cial Prop­erty Mon­i­tor, while Brexit is damp­en­ing mar­ket sen­ti­ment in the UK, with neg­a­tive cap­i­tal value and rental ex­pec­ta­tions, most Euro­pean com­mer­cial prop­erty mar­kets re­main op­ti­mistic.

Out­side of Europe, trends in most emerg­ing mar­kets con­tinue to be down­beat, with the ex­cep­tion of In­dia. In some de­vel­oped mar­kets, such as the US and Ja­pan, mo­men­tum ap­pears to be fad­ing.

Dur­ing the sec­ond quar­ter of 2016, re­spon­dents to the RICS sur­vey re­flected the no­tice­able neg­a­tive ef­fect of the Brexit vote in the UK com­mer­cial prop­erty sec­tor, es­pe­cially in the city of Lon­don, where the RICS In­vest­ment sen­ti­ment Index fell from +13 to - 23. As uncer­tainty re­mains, it is too early to an­tic­i­pate if this is the early phase of a more pro­longed down­turn (as 54% of re­spon­dents an­tic­i­pated) or a quick re­ac­tion that will un­wind as the re­sult is di­gested.

By way of con­trast, on a near term ba­sis, com­mer­cial prop­erty con­tin­ues to per­form well else­where in the EU. Ger­many con­tin­ues to lead the way, at­tract­ing do­mes­tic and for­eign in­vestors to their main cities. As a mat­ter of fact, cities like Frank­furt, Ber­lin, Mu­nich and Ham­burg – of­ten men­tioned as po­ten­tial ben­e­fi­cia­ries to ac­tiv­ity re­lo­cat­ing from Lon­don - recorded another sig­nif­i­cant rise in in­vest­ment ac­tiv­ity dur­ing Q2, with very strong cap­i­tal value pro­jec­tions across both pri­mary and sec­ondary prop­erty as­sets.

Feed­back in Hun­gary is also ex­tremely op­ti­mistic, with cap­i­tal value and rental ex­pec­ta­tions par­tic­u­larly buoy­ant in Bu­dapest. The RICS Oc­cu­pier Sen­ti­ment Index stands at +58, the best re­sult across the 34 coun­tries mon­i­tored.

Con­fi­dence re­mains solid in Ire­land, Spain and Por­tu­gal as re­spon­dents are ex­pect­ing rents and cap­i­tal val­ues to rise firmly in the com­ing months. But ac­tiv­ity is start­ing to lose some mo­men­tum com­pared to pre­vi­ous quar­ters.

“The lat­est data clearly show uncer­tainty in the af­ter­math of the ref­er­en­dum has ad­versely im­pacted sen­ti­ment in the UK com­mer­cial prop­erty mar­ket, with feed­back par­tic­u­larly cau­tious in Lon­don,” said Si­mon Ru­bin­sohn, RICS Chief Economist.

“The po­ten­tial knock-on ef­fects through­out Europe will only be­come vis­i­ble over time and much will de­pend on the out­come of ne­go­ti­a­tions be­tween the EU and the UK. For the time be­ing, con­fi­dence re­mains solid in many parts of Europe and Ger­many, in par­tic­u­lar, posted another ro­bust set of re­sults. On­go­ing mone­tary pol­icy stim­u­lus from the ECB is likely to sup­port in­vest­ment flows into the sec­tor as bond yields are pushed down fur­ther, mak­ing the re­turn of­fered by real es­tate more at­trac­tive.”

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