London's commercial property market has been shaken up by the Brexit vote with property funds having to be frozen to stop investors taking all their money out.
It has not been a good week to be an investor in commercial property in the UK.
London’s up-till-now red-hot real estate market was very much shaken up by the Brexit vote.
The turmoil came as a lot people asked for their money back from property funds concerned there will now be a slowdown in business investment and less demand for offices and shopping centres leading to a drop in commercial property prices in the UK.
Those property funds reacted to the run by suspending trading freezing at least 18 billion pounds (21 billion euros).
Market commentator David Buik of Panmure Gordon said: “There is concern that we could enter recession by the first quarter of 2017, and if we are not seeing major money coming from overseas investors into commercial property – which Mark Carney has said is down in terms of turnover by 50 percent since the first quarter of 2016 – that is very significant.”
Buik believes falling property values, even the possibility of negative equity, would put the banks “under extreme duress”.
But Bank of England governor Mark Carney this week tried to reassure by saying: “The exposure of UK banks to commercial property has been kept quite manageable.” Carney added: “This is not a big issue for UK banks.”
Developer warns on Brexit impact: Get ready for a slowdown in the London commercial property market, a leadin… https://t.co/3BPXUpZr4W
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