The prospect of a so-called “hard” Brexit is starting to affect UK property according to fund manager Deutsche Asset Management, with a consequent risk to rents and values.
In a UK real estate update in March, Deutsche commented: “For non-prime stock there is already evidence of values declining, and we expect that even the best stock could see yields drift higher in the event of a hard Brexit. As such, investors should await this price adjustment prior to re-entry, and today focus on emerging London locations and regional cities.”
Deutsche added they expect further rental decline in central London, with prime City rents falling by 4.3% in 2018. It said that the impact of Brexit will create opportunities to acquire misplaced but high quality assets with solid long-term fundamentals at attractive yields.
Elsewhere in Europe, Deutsche said that the impressive performance of the French economy is likely to generate higher rental growth in Paris in the future. On Germany, it said: “It is the German cities, driven largely by Berlin and Frankfurt, where we foresee the most impressive rental growth in core Europe.”