The United Kingdom’s recent decision to leave the EU, popularly termed “Brexit”, sent shockwaves around the political world, and had extreme implications for global finances. In the immediate run up to the vote, UK citizens were widely expected to vote to remain within the EU, and political pundits were confounded by the decision to leave.
The impact of Brexit will not be isolated to UK shores. Instead, the effects of Brexit immediately hit global markets – wiping out a mind boggling 2 trillion dollars of wealth in one day. And, the results of the vote are far from over, global markets are expected to continue to experience the shockwaves of the leave vote for some time to come. Many commentators observe that a period of high volatility is likely to continue for some time, preventing an immediate bounce back of the markets. Nonetheless, global stock markets rallied surprisingly well in the days after Brexit, with the nasdaq recovering half of the losses it incurred the day of the vote.
One market that is certain to be influenced by Brexit is the real estate market. Anyone involved in real estate should pay close attention to the vote. In fact, many are expected to be drawn to US markets, since the US economy can offer a sense of stability where the UK cannot. Brexit, therefore, will have a relatively minimal impact on the stability of US real estate, especially as European and UK investors start to target these markets in order to gain some much needed solidity in the wake of Brexit. Furthermore, prices will be driven down in the short term, creating a buying opportunity that real estate professionals should pay attention to. We are still in the period of immediate reaction to Brexit, and as confidence levels rise, so to will associated confidence. It is therefore a good time to consider investing in a relatively deflated US real estate market, with an extremely strong chance of returning to full strength over the coming months.
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There is another dimension to how Brexit will impact US real estate portfolios. Foreign demand for US real estate could drive prices up and keep values at inflated levels, despite any of the instability associated with Brexit. Firstly, high wealth individuals who are put off by European and UK risk, may consider buying properties in US cities instead. Similarly private enterprises and companies that no longer see as many financial benefits in remaining located in London, may consider investing in office space and other real estate in cities like New York, San Francisco, and Los Angeles. This is not limited to investors in European and UK cities either, foreign investors from China and India are clearly concerned about the effects of Brexit, and they too might be inclined to seek safe harbor in US markets. Overall, then, despite the immediate costs of the Brexit vote, and the undoubted insecurity which it creates in global markets, the outlook for US real estate remains promising. Because the US is widely considered a safe haven for capital while Europe goes through various upheavals, those holding US real estate portfolios look set to benefit. Indeed, they would be wise to consider the notion of expanding their holdings in order to take advantage of these structural conditions.
Real estate portals, such as MLS, provide a great way to get a national overview of property prices and real estate opportunities from around the country. They also allow individuals to remain in touch with ongoing news and changing dynamics in real estate markets. MLS is geared towards providing listings for professionals in real estate, and can help you understand the economy during the tumultuous post Brexit period.