When first thinking about this article, my concern was about being too confrontational and keeping a measured tone.
I am very firmly in the remain camp and, while you should always respect opposing views, I find myself becoming increasingly perplexed by the Brexit arguments, which appear more emotional than rational. The concept of sovereignty, while appealing, is, in my opinion, becoming outdated.
Pretty much any Brexiteer will say that the remain camp has propagated “project fear” and that we cannot know many of the outcomes of a vote to leave. This is where our Brexit friends have it wrong, as many independent people have told us what will happen. The Bank of England, the IMF, the World Bank, the US president, JP Morgan and Michael Bloomberg, to name but a few, have all warned of the economic consequences.
The fact that the Brexit camp has ignored these warnings and dismissed them with the handy but populist soundbite “project fear” is erroneous as Brexit certainly has the capacity to create a global systemic shock. Best case, it will cause a medium-term slowdown in the UK and probably Europe, while capital determines what the impact of a Brexit means.
Worst case, it starts a series of events that could lead to the dismantling of the European Union and another global financial crisis. While I hope that a Brexit vote would be contained, the law of unintended consequences cannot be ignored. The weakening of sterling after the announcement of Boris Johnson’s overtly political defection to the Brexit camp was a clear indication of what the capital markets’ reaction to a leave vote would be.
The impact on real estate, particularly in the UK and especially in London, is likely to be a substantial reduction in liquidity that will result in a reduction of the bid. The difference between 2008 and now, though, is 0% interest rates, which will protect income-producing real estate, so there is unlikely to be any immediate distress. However, this would create a significant market hiatus, with investors unwilling to invest without a substantial discount and potential vendors having the cash flow to sit it out.
In the short term, the issue will not be a collapse in capital pricing but the impact on the occupational market, which in due course will affect the income that can be generated from the assets, which, in turn, will cause a medium-term downward drift in capital values.
With so much potential geopolitical risk around the globe, including a slowdown in China, a Trump presidency in the US and the ongoing upheaval in the Middle East, coupled with relatively poor performance in the equity, fixed-income and commodity markets, the real question for the Brexiteers is: “Why now?”
The European Commission and Parliament need structural reform, but that is inevitable anyway, as we are not the only member of the EU with doubts about its current trajectory. Having said that, we seem to be forgetting all the immensely positive things that the EU has achieved, from the single market to open skies, and a period of more than 70 years of continuous peace on the continent.
The Brexit camp is right that we cannot know the long-term consequences of a leave vote, because so much will depend on how other people and nations respond. That, however, is precisely the fallacy of the Brexit campaign. This vote is not really about us; it is about the global impact of our actions and how the rest of Europe and the global community react.
The Brexit campaign appears to ignore the fact that the world has moved on and is, through improving communication, only going to integrate further. I would much rather try to improve the EU from the inside than find us isolated both commercially and politically, which I believe is a real risk should we not vote remain on 23 June.
It is clear that if we were to vote to leave, as a nation we would not make any new friends, while antagonising our existing ones, and that cannot be a positive thing
for our industry.
Richard Croft is chief executive of M7 Real Estate
