It’s a topic that has been on everyone’s mind lately. On June 23rd, with a vote of 51.9% residents of Britain voted to leave the European Union, commonly identified as the “Brexit”, in a dramatic way, diving and rising aggressively in the days following the vote. Although analysts are still mixed about the long-term effects that the “Brexit” will have on the world economy, one financial institution that could see long term change is the multifamily real estate market.
This week saw the release of a Yardi Matrix report that tackled the subject with both optimism and pessimism. In a great summary piece about the report, GlobeSt.com’s Paul Bubny noted that the report took a tone of uncertainty, suggesting that in the short term apartment markets would likely be unaffected. However in the long term it is a different story. Bubny notes that a lack of a time table or economic impact report means markets may have little time to prepare before long-term decisions are made. However, to say the report is nothing but doom and gloom would be selling it short.
Most interestingly for multifamily investors, the Yardi Matrix report did suggest potential long term benefits for a seller’s market in the wake of global allocation. Bubny notes “global investors, which seemed to pull back on capital allocations to the US in the first half of this year, might decide to increase investments in safe asset classes such as multifamily.” This could mean an increase in foreign investors looking into US real estate markets for long term investment goals leading to more competition on the buyer side and more opportunity for sellers. Another article by KC Sanjay of AXIOmetrics reiterates this point, suggesting that recent tax burden reform on the part of the United States may provide an opportunity for foreign investors to move away from investments in Britain. However, although the Yardi Matrix does note that US fundamentals like employment and demand are strong, it also stresses that the situation will continue to evolve and to proceed with caution.
In the end, multifamily investors, like the rest of the world, should remain optimistic that whatever happens in Europe will be cause for new opportunity and market development.
Paul Bubny’s article “Little Brexit Impact Seen For Robust MF Rents” can be found HERE
KC SanJay’s article “The Brexit Impact on Apartment Investment” can be found HERE