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Brexit: Property, housebuilders hit

Both sectors have been bashed, but the longer-term outlook is not that bad
June 24, 2016

With the EU referendum out of the way, it would be nice to think that all the uncertainty leading up to the vote would be out of the way. It's not, and for property and housebuilders the uncertainty is set to continue for some time yet. The first few hours of trading saw both sectors take the inevitable knock as investors overreacted in time honoured fashion. But is this justified? Let's tackle the potential bad news first, and it must be stressed that none of this is set in stone. We are as ignorant of the full implications as we were before the referendum.

London; the bad news...

London will take the biggest hit because it is the financial centre of the world. Estimates vary, but as many as 200,000 jobs could go, which equates to around 2 per cent of London's working population. In property terms, this would lead to about 17m sq ft of commercial property coming back onto the market; the equivalent of about 8 per cent of London's office space. With vacancies springing up everywhere, property values could fall by as much as a third. The other worry is that it had been widely assumed that capital growth would be replaced by higher rents as the primary growth driver. But with the prospect of falling values and downward pressure on rent as the supply/demand imbalance shrinks, many property companies could be ex-growth.

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