As the world waits to see the full impact of a Brexit, Mansion Global posed five questions regarding luxury housing to two industry experts, one from each side of the pond, to get their quick takes on issues ranging from new high-end developments in London to property investment in the rest of Europe.
Below are answers from Simon Barry, Director at Harrods Estates in London, and Jonathan Miller, chief executive of appraisal firm Miller Samuel in New York.
Q: What does Brexit mean to new luxury developments in London, including those on the market, those in the process of being built and those being planned?
Mr. Barry: “We see super prime developments in 5-star locations consolidating their safe-haven status. Developments already on the market are going to be hit by the current uncertainty. Many developments in planning are likely to be on hold as London residential developers will not build speculatively, and if schemes can’t be presold, they won't proceed.”
Mr. Miller: “I would expect a pause in the market as investors and buyers grapple with the significant change just levied on the market. The market was already cooling before the Brexit vote. Lower sales volume and softening prices are a likely outcome.”
Q: Which foreign buyers would benefit most from buying luxury properties in London now?
Mr. Barry: “Cash buyers will benefit both from weak sterling and if they can move quickly, will secure some great deals.”
Mr. Miller: “I don’t see an advantage held by one country over another at this time. I suspect that as time passes, foreign buyers will return and take advantage of lower asset prices, especially if the expected economic outcome has been exaggerated.”
Q: Does Brexit just impact luxury properties in London or also big estates in other parts of the U.K. as well?
Mr. Barry: “The country house market has traditionally had more support from domestic buyers who are more likely to be leveraged, so if Brexit results in tighter bank lending, it could suffer more.”
Mr. Miller: “There will be a countrywide impact, although London has one of the largest concentrations of newly developed luxury housing.”
Q: Is luxury property investment in the rest of Europe as uncertain as it is in London?
Mr. Barry: “London is still the biggest, most diverse and open luxury market in Europe where demand is not dependent on any single group of buyer domestic or overseas. There is nowhere else in Europe that can make the same claim.”
Mr. Miller: “Yes, both are in the same boat, so to speak, although I would think that Europe has the potential to improve sooner. The enemy of the housing market has always been uncertainty, not the outcome itself.”
Q: How long really will it take before we understand the full impact of the fallout on the London market as a result of Brexit?
Mr. Barry: “It may take several years for the real economic impact of Brexit to be felt in terms of long-term strategic decisions which affect London. But once we see strong political leadership and clear direction from the government, the market can have confidence in its power to negotiate a settlement with the EU and move forward. We should know more by the end of the party conference season in October.”
Mr. Miller: “No one on earth has any idea at this point. The thing I can say for sure is that it will not be business as usual for the economy on Monday.”