When exploring outcomes on 2016 real estate investing due to possible net effects of BREXIT. The Chinese curse of: “May you live in interesting times“ comes to mind.
First and foremost, this entry is not a discussion on the right or wrong of the UK choosing to exit the EU. We are sharing some thoughts on net effects for 2016 real estate investing.
First thing that comes to mind is: Where there is strife there is opportunity.
What is ‘Brexit’
Brexit is an abbreviation of “British exit”, which refers to the June 23, 2016 referendum by British voters to exit the European Union. The referendum roiled global markets, including currencies, causing the British pound to fall to its lowest level in decades. Prime Minister David Cameron, who supported the UK remaining in the EU announced he would step down in October.
This sent the financial markets downward for the first 2 days. Again: where there is strife there is opportunity.
You will find that Real Estate is a safe haven for capital (current real estate pricing cycle dependent). On a side note Commercial REITS should do really well in the near term. Commercial Real Estate in America should benefit from an inflow of capital. That is also problematic as quality commercial investments are already trading at extremely low CAP rates.
The British Pound Sterling also devalued. This is impactful to UK Property owners. Do you trade out of your American asset? This may cause some UK property owners to hold assets longer. Also, would you trade out into a into an uncertain market? This also will impact foreign investors who typically would invest in the UK.
Another net effect for 2016 real estate investing is that this turmoil should hold interest rates down. That is helpful and hurtful at the same time. Helpful in that borrowing costs are lower. Hurtful in that the trapped equity in real estate will remain there. Many investors would trade out of their 2009 thru 2012 purchases except for lack of an acceptable yield in the next investment. Are you going to put that treasure in a CD at .75%?
While we are only a few days past this event. It is sure to have an impact. It bears watching. Something to keep in mind for 2016 real estate investing. It’s not how the market behaves but HOW YOU behave that determines your success.
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Author: Jeff Tumbarello. Director SWFL REIA, Broker/Owner of Steelbridge Realty LLC