In the February issue of Funds Europe, José-Luis Pellicer, head of investment strategy and research at M&G Real Estate, discusses UK real estate investment in the post-Brexit landscape.
UK real estate pricing has been penalised by Brexit uncertainty since 2016. However, we believe the pricing differential between London and other major European cities will now begin to erode, reinforced by structural strengths such as the London market’s size, deep pools of liquidity and low cyclical supply risk, following the UK’s orderly departure from the European Union.
While the future regulatory framework for financial services is yet to be determined, we believe there remains strong justification for a large share of the industry to retain roots in the UK.
Crucially, London reflects a strong source of human capital, with a long history of innovation in financial services. It also represents a powerhouse in business services, technology and biotech, and it is important to consider that the UK is one of the most business-friendly countries in Europe.
Although pricing of UK real estate now appears an outlier when compared to other major European cities, we expect investors to capitalise on this differential as it begins to normalise, reinforced by reduced political and Covid-19-related uncertainty, which may well encourage some investors to increase their risk tolerance.
Read more about the global real estate investment landscape here: Global real estate: Beds, sheds and meds
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