Country Report Great Britain Q4-2018
“The interest of international investors is unwavering – so far the Brexit has not changed that.”

Dear readers,

looking back at 2018 we can see that it was a year of sideward movement. That is true of both the real estate market and the Brexit. While that was positive for the real estate market, considering its continuing high level, it was far from positive with regard to the Brexit.  Almost three years after the referendum and there is still no clarity regarding the United Kingdom’s exit from the EU – and the clock is ticking! Considered against that backdrop, it is remarkable how robust and fluid the real estate market is. And that is not only the case in London, regions such as Manchester and Leeds have also developed strongly. Interest in the British commercial real estate market among international investors is unwavering – so far the Brexit has not changed that.


Your Markus Nitsche

Contact

Mr Markus Nitsche
Managing Director Great Britain

Phone: +44 20 742 947 00
E-mail: Markus.Nitsche@deutschehypo.com

Brexit uncertainty has negative effects

The recent development of the British Real Estate Economy Index was comparatively good, despite the threat of Brexit: following a strong second quarter, there was only a slight downturn in the third quarter. However, the decline in the British REECOX at the end of the year was the largest of any country surveyed. Compared to the third quarter, the index fell by 5.4 % to 204.9 points at the end of December 2018.

Brexit at the gates – how is the market reacting?

The recent trend was significantly affected by the development of the British share indices, which recorded double-digit declines in the last quarter. For example, the British leading share index FTSE 100 showed a continuous downward trend for each month of the fourth quarter, with a total decline of 10.4 % to 6,728.1 points.
Meanwhile the FTSE EPRA/NAREIT UK real estate index also slumped to almost the 1,000 point mark; it declined by 10.8 % compared to the third quarter to 1,072.8 points at the end of the year.

And the recently improving outlook of the real estate experts surveyed for the Economic Sentiment Indicator (ESI) also declined by 2.6 % compared to the third quarter, to 105.6 points. That means that, overall, all market variables developed negatively in the last quarter – in some cases significantly. It remains to be seen what the effect of the ongoing Brexit negotiations will be.

Synopsis of Input Variables and Real Estate Economic Situations Q4-2018

Country

Stock Index

Real Estate Economy Index

Economic Indicator

Base Interest Rate

Interest Rate 10-Year Government Bonds

Q3-1810/1811/18Q4-18Delta (%)
Q3-18 / Q4-18
DE
dodo
do
do
eq
do
312.8
306.0
308.2
298.2
-4.7
GB
dodo
do
do
eq
do
216.5
213.1
206.8
204.9
-5.4
PL
eq
do
eq
eq
dodo
188.3
185.6
188.8
187.5
-0.4
NL
dodo
dodo
do
eq
do
199.3
195.3
194.8
191.3
-4.0
FR
dodo
dodo
dodo
eq
eq
236.2
229.7
228.6
223.7
-5.3
ES
dodo
do
do
eq
eq
196.4
195.8
196.4
191.8
-2.3