Financial service companies have the potential to lose out if we exit Europe, with the UK property market suffering if this happens. This is because it is possible that Brexit could result in the financial centre of Europe being relocated to Paris or Frankfurt. If this occurs the city of London will likely suffer as some institutions relocate to the continent. The knock on effect will be that commercial property will be hit first, with vacancy rates rising and the premium commanded by central London office space shrinking. An exit could come at an unfortunate time for the city as new developments are coming on stream soon that will increase supply and ultimately have the effect of seeing vacancy rates spike even higher with rentals falling further.
The wider market could also be affected as employers move out with demand for residential property falling and most pain being felt at first at the high end of the market. I predict that if this happens it will then filter through to the lower priced properties in the city and then ripple out to the rest of the UK.
I think that some of the biggest sufferers outside of London will be the big cities that have been building heavily during the last few years in anticipation of faster rail links with the capital such as the Northern powerhouse cities. If the city of London is going to have slower growth it is possible that the same will apply to these cities creating a surplus of residential and commercial property. This could further impact if we accept that a Brexit will bring about immigration control, that will have the effect of damping down further the demand for property.
On the upside lower prices should help first time buyers get onto the first step of the property ladder, particularly in the larger cities, with a short term property reversal taking out the speculators leading to a more orderly market. Also it could be argued that plans to build houses on the green belt could be scaled back as perhaps demand in the future for property may not be as high as had been originally predicted. It is also likely that the commercial market may not suffer too much, as long as long term investors from abroad take advantage of what is likely to be a weak pound if we exit and help support the market.
Overall I think that in the short term if we exit the Euro financial services and property will be hit but perhaps not by that much. Although our links may be loosened with Europe there will be other opportunities for the city and the rest of England to develop the economy. I believe that for many the decision to vote in or out of Europe is an incredibly difficult one which I believe should not be made on what will benefit you most but what will benefit the country as a whole.
Kieron Bassett Dip PFS, Cert SMP
29th February 2016
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