Editorial

Citation

French, N. (2016), "Editorial", Journal of Property Investment & Finance, Vol. 34 No. 5. https://doi.org/10.1108/JPIF-05-2016-0037

Editorial

Article Type: Editorial From: Journal of Property Investment & Finance, Volume 34, Issue 5.

Property, uncertainty and the European Union

 Brexit equals the exit of certainty (Emma Strachan (MSc student, Oxford Brookes University), May 2016).

I am writing this editorial mid-air on the way to Lisbon with 50 MSc real estate students in tow to spend a week studying the Portuguese real estate market. It will be an arduous but enjoyable week of lectures and field trips culminating in vivas to ask our students if a hypothetical property fund client should invest in Lisbon real estate. Understandably, as, at the time of writing, this is four weeks before the UK “Brexit” vote, the main topic of conversation is the impact of a “yes” or “no” vote on the real estate markets and, more pertinently, on their lives.

As Programme Director, and in the interest of promoting debate, I am being impartial. I am just listening and, for the sake of this editorial, acting as a scribe without comment. But it is interesting to hear the arguments of a younger generation.

Generally in the UK, if you want to understand the views of the “man on the street”, you only have to read the Sun newspaper and ask a London cabby their opinion. Both are veracious and adamant in their determination to leave the European Union (EU) even if they have little or no understanding of the economic consequences of an exit. The problem with the debate to date is that neither side, the stayers or the leavers, have any hard facts. It is all supposition; nobody knows what will happen. There is just a general consensus with this subset of society that we should leave. It is emotive and not considered on an economic basis. It is simply a vote on politics and immigration; the wish for democratic self-determination and control of our borders. But this tends to be an older person’s viewpoint.

The young have a different take. Almost without exception, anyone with whom I speak, who is 30 or younger, wants to stay. And as with the elders, their reasons are as equally ethereal when it comes to economic analysis. They just “feel” that they want to remain as members of a bigger European community. Albeit, there is very tangible impact that can be measure now and that is “uncertainty”. It is as if the economy has hit the pause button. Because UK PLC does not know what will happen, all decisions are being delayed.

As Rosie Gentle, one of the student reps, says “the impact on the job market is significant – many smaller firms are holding back on hiring graduates as a result of the uncertainty surrounding Brexit”. And that is the crux of the issue. It is not about yes or no, it is about the uncertainty that has arisen until the vote is made. Companies delay decisions.

But what will happen to the UK real estate market once the outcome is known? Emma Strachan eloquently says in the quote above, a stay vote will retain the status quo but an exit vote will simply bring about a whole new world of uncertainty. It may be that this will be short-lived and that the UK will thrive outside the EU; maybe it would not. The problem is that this new uncertainty will not result in a furthering stagnation, it will result in a range of new decisions that we cannot yet imagine. Maybe, investors who currently see the UK as safe haven outside the Eurozone, will decide that the reasons to invest have been strengthened by the exit. Conversely, investors may decide that the occupier market will be threatened by the UK being outside the UK and this start to disinvest. Again we do not know.

But there is one facet of the whole exit debate that seems to be missed. There is a view that if the UK leaves the EU then the EU will continue as it has done. But the new EU without the UK will be a different animal and it may not be as strong or as unified. People forget that the UK is a dominant economy in the EU and the EU will be “less” if the UK leaves. It will be a period of great uncertainty for both the UK and the new EU.

Nick French

Editor, May 2016