RCA Insights

European Investors Shy From UK in Brexit Run-Up

By on August 27th, 2019

Here in the U.K. it is nigh on impossible to escape the conversation around Brexit. Media, friends, family, work, leisure … saturation point was reached many months ago.

The increased possibility of a no-deal Brexit is clearly having a dampening effect on the U.K. property investment market. Transaction volume in the first half of 2019 was down 30% in comparison with the first half of 2018, and certain markets have posted acquisition volume levels similar to those last recorded during the Global Financial Crisis.

One reason for the slowing is the sharp drop-off in acquisitions by European investors. These players spent 50% less in the U.K. in the first half of 2019 compared with a year ago; the second quarter was the slowest three-month period for investment from these buyers since 2014; and, fewer deals completed in the last quarter than at any time since 2013.

1908 Europe flows UK Q2 2019-01

(There has been a pick-up in transaction volume in the third quarter, but that is due to one deal – the acquisition of a £600m ($730m) portfolio of student housing by Germany’s DWS. Only four deals by European investors completed in July this year, versus 16 in July 2018.)

German, French and Nordic players have not been buying in the U.K. to the same scale as, for example, North American and Asian investors have through the cycle. But 2018 was a stronger year, driven principally by two large deals by French investors.

The 2019 investment slowdown does emphasize the cautionary attitude prevalent in the market in the run-up to October 31 and the U.K.’s scheduled exit from the European Union.

Also on RCA Insights:

Deal Activity in Europe Slips in Q2 2019; UK Slides

UK Politics Wracked With Turmoil But CRE Prices Aren’t

Tom Leahy

Tom Leahy

Senior Director, EMEA Analytics
tleahy@rcanalytics.com

Tom joined RCA in November 2014. In his role as Senior Director for the EMEA region, Tom is responsible for the development and expansion of the market analytics service for RCA’s European clients.

Prior to joining RCA, Tom was an Associate Director and then Head of Research at UK-based property consultancy, Lambert Smith Hampton. He started his career as an analyst at research consultancy Property Market Analysis (PMA).