Brexit – Real Estate Update
In the run-up to the referendum, many of the headlines focused on the economy and immigration. Little was made of the real estate market, which is surprising given that it is reported to be worth nearly £7 trillion; account for 35% of the value of the U.K.’s stock market and 44% of government bonds; raise £15 billion of revenue each year through taxes; and employ almost a million people. This post focuses on what impact the exit from the EU will have on property in the U.K.
From a purely legal perspective, real estate has not been greatly affected by the U.K.’s membership to the EU. This is in contrast with, for example, the law regarding intellectual property, which is bound by numerous EU regulations which have a direct effect on our national laws without the need of being transposed as part of it. The Land Registry has remained the solitary record of land and property ownership in England and Wales and, as such, the legal formalities and requirements with regards to the ownership, registration of and dealings with land will remain largely unaffected by “Brexit”.
It should be noted, however, that dealings with commercial real estate are not isolated events. There is the need for finance and, in the case of development projects, the provision of a workforce and planning and environmental matters will usually be of relevance, as follows:-
Finance:- According to the Bank of England, commercial real estate transactions were down 40% in the first quarter of 2016. Most attributed this to the uncertainty caused by referendum itself as opposed to the availability of funds. However, post Brexit we can now see that funds are more restricted. A senior executive at a U.K. bank is reported to have confirmed this, stating:
“The availability of credit to commercial real estate has taken an immediate downturn post the vote. A number of overseas lenders in particular have signalled reduced or no appetite for commercial real estate risk … we are seeing a downward spiral of confidence.”
Workforce/Immigration:- It is well documented that many property developers in the U.K. depend on workforce dominated by European migrants who benefit from the free movement of workers, one of the founding principles of the EU. If the movement of such workers is restricted following the negotiations to leave the EU, construction firms may be left with a staffing crisis.
Planning and Environment:- Many national laws regarding planning have derived from the implementation of a series of EU directives. Directives are implemented by the passing of domestic legislation and so departing from the EU will give the U.K. scope to deregulate by amending the law in these areas.