Savills has called for a June referendum on the UK’s membership of the EU to minimise the impact of uncertainty on the property industry.
Investment volumes for the year to date are currently 10% lower than those in January 2015 and a longer wait for a Brexit decision would slow investment volumes further, Savills said.
A June referendum is the preferred option for prime minister David Cameron, provided he can agree reforms with other EU member states in the coming weeks.
Mark Ridley, Savills’ UK & Europe chief executive, said: “As we saw in the run up to the 2015 general election, one of the biggest threats to the UK market can be prolonged uncertainty. A referendum in June, whatever the outcome, will therefore offer investors security and enable them to plan for the long term. The more drawn out the process, the more likely that investment volumes will fall throughout the year.”
Savills has forecast that total returns on UK commercial property are likely to cool to 8-9% this year, compared with 20% at their peak in October 2014, driven by a five-year period of lower capital value growth.
The low point of the current market cycle was forecast to be in 2017, when growth was expected to remain flat, followed by higher returns in 2018-19, driven by increased income returns, leading to five-year average returns of 7-8%.
The attraction of the UK to occupiers would not be severely affected by Brexit, Savills said, because of the continued attraction of the UK’s location, time-zone, talent pool, access to capital and legal system.
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