Brexit!
So how will the UK leaving the EU affect real estate in NYC? In most people’s estimation, positively with one caveat: Things will be good as long as Bexit doesn’t trigger a world wide recession.
Last year, NYC replaced London as the number one city for foreign real estate investment for the first time and that was BEFORE anybody thought the Brexit would happen. With multiple years of uncertainty and instability, NYC is now looking even more attractive (despite whoever wins the presidency) and relatively stable. Expect a lot of finance jobs to Brexit from London (see i’m using it as a verb) and end up in New York as well, bringing investment money, salaries and the need for housing with them.
Don’t take my word for it, here’s a good, short article from the Real Deal:
http://therealdeal.com/2016/06/24/brexit-everyone-panic-except-new-york/
And a longer summary from Brown Harris Steven’s Chief Economist, Gregory Heym’s talk:
Immediate impact of Brexit:
• Nothing has happened yet, the clock will start after new prime minister is chosen-probably in October.
• While the exit vote is not legally binding, it currently appears it will be honored.
• It can take up to two years after article 50 is triggered. (Article 50 sets out how an EU country might voluntarily leave the union.)
• This is a political decision, not an economic one. Economists agree this will negatively impact the UK economy in the short run. More about immigration and control than trade.
• The uncertainty created will certainly hurt business investment in the UK.
• The Pound dropped to its lowest level vs US dollar since 1985. Although, it edged up a bit today – 0.5% vs US Dollar.
• S&P downgraded UK credit rating to AA.
• Will affect London’s status as world financial center.
Important to remember:
• The fact that the result was a surprise certainly contributes to magnitude of decline.
• The 230-point jump the day before vote contributed to steepness of Friday’s drop.
• The Dow was this low as recently as mid-March.
• While stocks have had their worst two-day decline since August, only down 2% for year.
• Banks are in much better shape to handle any crisis, due to stress tests.
• Central banks are committed to maintaining liquidity in the financial markets.
• UK runs trade deficits with Europe, the EU will rush to sign new agreements.
• UK is only America’s 7th largest trading partner.
Impact on US:
• US GDP will be hurt by less than 0.25%.
• No Fed hike until at least December at the earliest.
• Combined with recent tax increases, Brexit will hurt London’s luxury real estate market, helping Manhattan, even with reduced purchasing power of UK citizens.
• Mortgage rates will likely fall, were already at a 3-year low before vote.
Recommended Brexit NYC Real Estate Reading:
· Brexit 101: What just happened, and why it’s important for Americans
http://www.cnbc.com/2016/06/24/brexit-101-what-just-happened-and-why-its-important-for-americans.html
· The UK’s EU referendum: All you need to know
http://www.bbc.com/news/uk-politics-32810887
· EU referendum | Sixty years of strained relations
https://cf-particle-html.eip.telegraph.co.uk/b7f79a30-fa28-4826-bdf9-5b5c9458ec07.html?ref=http://www.telegraph.co.uk/news/2016/06/24/get-ready-for-the-age-of-boris/&title=Get%20ready%20for%20the%20age%20of%20Boris
· U.S. markets fall and U.K. credit rating cut; no crisis, Treasury chief says
http://www.latimes.com/business/la-fi-brexit-lew-economy-20160627-snap-story.html
· Brexit vote could drive up New York real estate, hurt tourism
http://www.crainsnewyork.com/article/20160623/ECONOMY/160629907/brexit-vote-could-drive-up-new-york-real-estate-hurt-tourism
Might be a good time to buy in NYC and vacation in the British Isles. Just sayin’.