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China

Property Market Implications as Britain Votes to Leave the EU


​​​Property Market Implications from Brexit

What happens next in the UK after the vote to leave the EU?

The vote for Brexit brings a new dawn for Britain, with considerable uncertainty and no real precedent. Even if it is effectively ‘business as usual’ for the UK in terms of trade and legislation until 2018, such a major change will inevitably create uncertainty in the economy and real estate markets. In the event of a well-managed exit these impacts will be largely confined to the UK.

In the short term we may see a weakening in occupier demand in the UK. The impact on rents may be limited by tight supply, but activity will be adversely hit while initial uncertainty about direction and timing continues. Investor sentiment may also remain subdued in the short to medium term. For property markets, the initial correction may be most severe but should be followed by an upturn as opportunities re-emerge in UK core markets and benefits of weak sterling are recognised. Sentiment and relative pricing will be key. Much will depend on the speed of negotiation, the wider political picture and whether a clear direction of travel and timetable for an EU exit is established early on.

Winners and losers from Brexit in Asia Pacific

Any immediate impact from Brexit on Asia Pacific real estate markets will be from foreign buyers who are unable to bid until volatility passes and banks that have strong connections to Europe who are unable to price risk in current volatile markets. It is possible that real estate investment deal flow may slow, whilst this period of financial volatility continues. However, there will be winners. The weight of capital in Asia Pacific is such that alternative capital sources inside Asia will be able to take advantage of the opportunities presented. Some currencies will strengthen - notably the JPY - increasing purchasing power. 

​The direct impact on China from the Brexit will be small as external demand is no longer a key driver of China’s growth, although stronger USD puts depreciation pressure on the CNY, which will again test the PBOC’s management of the exchange rate. China’s real estate market is relatively well insulated from global turmoil as it is largely based on domestic occupiers. In other Asia Pacific markets, the mix is often domestic firms and MNC serving domestic economies. Asian investment capital, particularly Chinese insurers have been extremely active on the global stage. In the UK, the EU referendum slowed investment into London in the first quarter; by contrast we saw a comparatively big rise in intra-regional demand with Chinese capital buying inside the region, notably in Hong Kong. It is highly likely that Asian capital will continue this trend of buying closer to home, in markets that are as transparent as London, for example Sydney; or markets like Shanghai that are becoming considerably more institutional in nature.

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​About JLL

JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $58.3 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, www.jll.com

JLL has over 50 years of experience in Asia Pacific, with over 33,000 employees operating in 92 offices in 16 countries across the region. The firm won 15 awards at the International Property Awards Asia Pacific in 2016 and was named number one real estate advisor in Asia at the 2015 Euromoney Real Estate Awards. www.jll.com/asiapacific  

​In Greater China, the firm was named ‘Best Property Consultancy in China’ at the International Property Awards Asia Pacific 2016, and has more than 2,200 professionals and 14,000 on-site staff providing quality real estate advice and services in over 80 cities across the country.  www.joneslanglasalle.com.cn​​​​​​​