Back HomeLondon Real Estate vs. New York Real Estate
Most of the news following the Brexit vote has been centered around how this will affect the American Markets. Most coverage, however, has neglected to highlight the impact that this monumental event has had on the United Kingdom (specifically London-based) real estate market. Summer 2016 following Brexit has caused an immediate real estate boom in the UK and has sent sale prices surging, much to the surprise of many who wrongly assumed that Brexit would be troublesome for the economy and housing market of the UK.
The result of Brexit that is having the largest impact on UK real estate is border patrol. Increased border patrol seems to be playing a two-fold role: 1) it has re-established a feeling of safety and security by locals, and 2) it has caused interest to increase from foreign buyers who still wish to have a presence in the UK. For locals, increased feelings of safety are leading many renters to become first time home buyers, illustrated by the number of mortgages seeing a drastic increase in the summer months, which are usually slow months in the banking industry. For foreign investors, the opportunity to purchase investment properties that will be occupied by UK-only residents presents an opportunity for them to have fewer discrepancies in renting and leasing contracts.
Foreign investors have been purchasing property in London because they feel that with stability of renters, property value will eventually increase overtime. In the immediate impact following the referendum, it is the foreign buyers who have expressed the most interest in UK property. One of the main reasons for this uptick is that the pound had slightly decreased in value, making British properties more affordable world-wide. Zlata Rodionova reports, “European buyers can now snap up real bargains across London. Overnight London has become a more affordable global property hotspot – particularly for those paying in euros,” said managing director Andrew Bridges (1).
Interestingly, it seems that Brexit has – if anything – caused members of the EU to begin spending more money in UK property than they were pre-Brexit. Countries whose currency is comparatively low are now looking into London for further investment reasons. Since the UK is geographically so close to countries whose currency is the Euro, the majority of the buyers have ironically been from the European Union. Additionally, Hazel Sheffield of The Independent writes that, “estate agents in the UK have been swamped with calls from Chinese, Middle Eastern, Italian and Spanish buyers looking for a bargain after the pound tumbled to more than 30-year lows, making the exchange rate very favorable for foreign buyers” (2). There is no doubt that the UK will continue to see more buyers from near and far looking to invest in their property. When borders close, real estate booms.
On the other hand, the New York City market has not seen as much activity despite the fact that many were hoping Brexit would positively impact the US housing market. Both local and foreign purchasers seem to be pulling back from the US real estate market, particularly in Manhattan, as evidenced by Corcoran’s latest report stating that July 2016 housing prices are down by 18% since July 2015 across the entire market including condos, co-ops, townhouses, and commercial property in both the resale and new development sectors. Interestingly, 2016 has unfortunately been a year of consistent terrorist attacks throughout the US, which is causing buyers to lack the feelings of national security which have seemed to bolster real estate sales in the UK.
The latest July market report in The Real Deal highlights the effects of a slower market. Kyna Doles writes, “According to the latest batch of market reports, landlords offered more concessions … in July” (3). In addition condo sales averaged $2.1 million in July, which is a nearly $500k drop from the July 2015 average sale price. This means that developers, property managers, and sellers have come to the realization that they need to offer incentives or lower prices to make properties more attractive for buyers. Time will tell if this does attract more buyers back to the New York market.
(1) The Independent
(2) The Independent
(3) The Real Deal
