LaSalle Investment Management, the Chicago-based global real estate investment manager, has said the impact of Brexit is “likely to be shorter-lived and less severe than many investors fear.”
In the firm's mid-year investment strategy annual LaSalle said the UK's vote to leave the European Union will only interrupt, and not terminate, medium-term capital inflows into real estate and a correction in real estate pricing is expected to be largely restricted to the UK over the next 18 months.
The predicted capital market re-pricing in the UK will lead to an opportune time to enter the market for many overseas investors, the firm said. An example of taking advantage of the UK's recent currency depreciation is Bangkok-based property development company Country Group Developments, which earlier this week made an investment in the UK schools market.
“Turmoil in capital markets might also open higher-yielding buying opportunities from distressed sellers as the implications of the Brexit vote in the UK ripple around the world,” commented Jacques Gordon, global head of research and strategy at LaSalle.
However, Gordon did add a note of caution: “Although the UK has been the epi-centre for political and financial tremors since 24 June, the law of unintended consequences suggests that investors should also closely watch for ripple effects in the EU, North America and even all the way to Asia-Pacific.”
LaSalle said that globally the 'lower for longer' economic outlook could boost core real estate returns in the short-run, even as it dampens the long-run outlook for rental income growth.
“When rates and bond yields are low and capital markets are volatile, real estate usually gets the benefit of capital flows for being a relatively stable, yet higher yielding, asset class. If more volatility or uncertainties arise in other parts of the world, Asia-Pacific's relatively stable collection of nation states and treaties could be viewed more favourably by international investors,” said Elysia Tse, head of research and strategy for Asia-Pacific at LaSalle.