The UK’s decision to leave the European Union could have a positive impact on the real estate market.
While the initial instinct for investors, developers and others involved in the property sector will be to reflect, the medium to longer term outlook could be considerably brighter.
Once our “Brexit” has been negotiated, one of the biggest benefits could be a reduction in the amount of red tape that often seriously hampers the speed and flexibility with which real estate deals can be done.
There is no question that large local authority-backed deals will be able to proceed much quicker if barriers currently presented by EU state aid rules and procurement are loosened.
State aid occurs where an advantage in any form is conferred on selected groups by national public authorities. It is illegal under EU rules because it distorts competition.
The Government has walked a delicate tightrope on schemes such as Help to Buy clinging on to exemptions. Gaining approval to schemes can be hugely time-consuming and a relaxation in the rules could well pave the way for a much needed boost to the housing market.
The same applies to EU procurement rules. At the moment, any public sector body that wants to put out a tender for building works has to go through a convoluted and lengthy process to expose the opportunity to the wider European market.
Public sector organisations are in possession of a vast land bank and are under pressure to get the most from these assets.
Removing EU red tape will give local authorities much greater freedom and the scope to be more creative with the models used.
Clearly, change will not take effect overnight. It may take months, even years before our “Brexit” is finalised. No one yet knows what a post-EU UK will look like. There is talk of some kind of “associate membership” of the EU, allowing us to cherry pick the bits we like and discard the bits we are less keen on.
Everyone associated with the real estate sector will also continue to keep a close watch on the markets. Investment will undoubtedly slow down while the plan for our exit from the EU takes shape, leading at some point to the triggering of Article 50 which begins the formal process of the UK’s departure.
But a fall in the value of the pound and declining property prices should also increase the amount of investment flowing into the UK as investors look to take advantage of opportunities presented by the continuing uncertainty.
No one can sure what will happen in the coming months and years. But for those operating in the real estate market, there will be plenty of positives to come from a post-Brexit UK.
Blog posted by Hillyer McKeown’s James Cullen, an experienced commercial property solicitor who has acted for land owners, national developers and local authorities. James has also spent time working in-house for two local authorities on major projects.