LONDON (Reuters) - Britain’s commercial property market remains robust in the wake of a vote to leave the European Union, although a weaker economic outlook may see some prices dip over the next two years, ratings agency Moody’s said.
The June 23 vote had created significant uncertainty about the market in the medium term, it said in a report on Monday, although the agency’s base case view is that the fundamentals underpinning the sector are solid.
“While political risk will keep market uncertainty high, commercial property sector fundamentals will remain robust in Europe. That said, a weaker macro outlook would take the steam out of the UK commercial property market,” said Ramzi Kattan, Vice President – Senior Analyst at Moody’s.
“While we expect slower economic growth in the UK as a consequence of Brexit, we do not foresee a recession or – perhaps most importantly – a sharp increase in unemployment,” the report said.
If unemployment remained below 6 percent, employment growth would remain robust, it said, supporting demand for both housing and office space, although London commercial prices could be hit if firms move activities to elsewhere in the region.
“However we expect those roles to take many years to migrate and total numbers may be relatively small, given that employment in London has increased by roughly 35,000 a quarter since 2012 despite a somewhat subdued economic recovery.
“Nonetheless, the weaker macroeconomic outlook may take some of the steam out of UK property markets: in our base case, we see UK prices remaining broadly stable overall, but expect price decreases in particular instances of up to 10 percent depending on property type, quality and location.”
Reporting by Simon Jessop; editing by Rachel Armstrong