The UK’s contentious 2016 decision to leave its largest trading partner, the European Union, has caused a wave of political headaches and several high-profile resignations in the UK Parliament. But the infamous separation of powers seems to be a blessing in disguise for the UK’s real estate market as a recession looms overhead.
After the Brexit vote, some foreign investors increased their investments in other regions of Europe. With the aid of low-cost debt, this helped fuel a firestorm of demand for buildings in places like Paris, Berlin, and Milan that drove prices to all-time highs. As interest rates and government bond yields continue to rise, those high prices and meager returns seem less appealing, making some regions of Europe more vulnerable to a real estate downturn.
But properties in the UK have been trading at a discount to comparable properties in Europe thanks to a buffer created by the Brexit vote. Not only that, UK property yields are less susceptible to interest rate increases. With all of that, the UK is forecasted to be Europe’s best-performing real estate market over the next five years.