Real estate investment in the UK is set to reach £45 bn (€51.4 bn) in 2017, down £5 bn on the 2016 volume but on a par with the 10-year average, according to a new report released at Mipim by Colliers International.
The report, ‘In the Balance: United Kingdom 2017’, identifies EU fragmentation and US economic policy as the biggest risks to the future of the UK commercial property sector. Not Brexit, but the policies that European Council president Donald Tusk and US president Donald Trump may introduce in the coming year pose the biggest risks, the report concludes.
‘In the UK, media attention has been centred primarily on Brexit, but this risk to investors is a small part of a much larger risk of wider EU fragmentation and new Eurozone instabilities,’ said Walter Boettcher, chief economist at Colliers International.
‘Growing nationalism in key countries such as France, Italy, and the Netherlands, among others, poses large risks to Donald Tusk’s mission to push forward EU political unity. Many EU members are wishing to re-claim national sovereignty in many areas, including re-establishing national currencies. In fact, the UK’s notification to leave is looking increasingly as confirmation of EU political mismanagement,’ he added.
While London’s finance sector may be at risk by losing its ‘passport rights’ to EU markets, the EU is at risk of losing a major part of its financial infrastructure that is not readily reproduced outside of London, the report says.
Of equal, if not greater risk to the UK property market, is the unknown of US domestic and international policies, according to Colliers. ‘The potential for global capital diversion to the US is substantial given the possibility of new protectionist trade policies, deregulation of US financial markets, new corporate friendly tax policies and a much anticipated fiscal stimulus linked to large-scale infrastructure investment,’ said Richard Divall, head of cross-border capital markets EMEA at Colliers International.
