One consequence of Brexit could be that more London properties end up in foreign hands.
That's the ironic product of Britain's decision to exit the European Union — an outcome predicated in part on a desire to reduce immigration to the U.K.
Investors pulling money from U.K. property funds out of fear that real estate values will fall are forcing sales of prime properties in London. The managers of seven funds with about 18 billion pounds ($23.7 billion) of property suspended trading last week as investors rushed to redeem, and some are now offloading key holdings.
For certain investors, the timing couldn't be better. With the pound hovering near its weakest levels since the mid-1980s, the purchasing power of overseas investors in the U.K. has risen at exactly the time when Brexit jitters are helping to expand the pool of properties available to buy.
Aberdeen Asset Management Plc has hired a broker to sell an office building in the Hammersmith district of West London, and it is also reportedly working on the sale of a retail store on Oxford Street, Europe's busiest shopping thoroughfare. Meanwhile, Henderson Global Investors is believed to be planning to dispose of the headquarters of Coutts & Co., bankers to the British royals, that's located on the Strand, a stone's throw from Buckingham Palace.
Similar sales in recent years would have drawn strong demand from overseas buyers, including sovereign wealth funds, seeking to diversify their portfolios as yields on bonds decline. And while Brexit has rattled the real-estate sector, sterling at a 30-year low offers a compelling reason to think demand for the best assets will stay strong.
Indeed, just last week Swedish billionaire Stefan Persson reportedly agreed to buy retailer Debenhams Plc’s flagship store on Oxford Street.
"The slowdown of foreign investments in to London CRE in the run-up to the referendum started and many investments seems to have been put on ice for the time being," said Bank of America Corp. analysts led by Alexander Batchvarov, using the acronym for commercial property. "Having said that there seems to be always demand for trophy properties as the recent sale of an Oxford Street retail space proved."