Brexit may be dampening the UK real estate outlook, but sentiment in the EU remains positive, according to the latest RICS Global Commercial Property Monitor.
Respondents to the RICS survey in the second quarter of 2016 expressed fears about the negative effects of the referendum vote on the UK commercial property sector, especially in the city of London, where the RICS Investment Sentiment Index fell from +13 to -23.
Some 54% of respondents thought that this could signal the early phase of a more prolonged downturn, although RICS said it was too early to judge.
On a near term basis, commercial property continues to perform well elsewhere in the EU, according to RICS, with Germany leading the way. Cities such as Frankfurt, Berlin, Munich and Hamburg – often cited as potentially benefitting from business exiting London - recorded a further significant rise in investment activity during Q2. The data showed strong capital value projections across both primary and secondary property assets.
Hungary – and particularly Budapest – were other bright spots, with capital value and rental expectations strong in the capital. Respondents in Ireland, Spain and Portugal are all expecting rents and capital values to rise in the coming months, although at a slowing pace.
Beyond Europe, RICS reported that the downward trend continues, with the exception of India. Of the developed markets, momentum appears to be fading in countries like the US and Japan.
Simon Rubinson, RICS chief economist commented: ‘The potential knock-on effects (of Brexit) 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.’
He added: ‘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.’
