PETALING JAYA (June 28): In view of the UK’s vote to leave the European Union (EU) last Thursday by a 51.9% majority, JLL London has pointed out a few property market implications to homeowners and investors in London.
According to JLL head of residential research Adam Challis, one of the six implications is that occupier demand will weaken in line with economic growth and declining business sentiment, and while the impact on rents may be limited by tight supply, rental activity will be severely hit.
“[Secondly], investor sentiment will decline, further subduing capital flows in the short to medium term.
[Thirdly], the residential market is expected to cool despite lower interest rates, but any correction will be mild, except in London where values are higher, making the market more exposed,” he noted.
The other implication, Challis added, was that London sectors will likely undergo a negative capital value adjustment over the next two years — with an estimated contraction of up to 10% — with yields moving around 50 basis points.
“This is due to London’s current keen pricing and their multinational occupier base,” said Challis.
He noted that while the initial correction will be most severe, this will be followed by an upturn as opportunities re-emerge in UK core markets and the benefits of a weaker sterling are recognised.
“It very much will depend on the speed of negotiation, the wider political picture and whether a clear and favourable direction of travel is established early on,” he concluded.