Brexit rattles London commercial property

UK commercial-property values fell by 3.3% in July, in one of the earliest indications of a post-Brexit slowdown in the sector, according to the latest data from property adviser CBRE. Office buildings in the City of London were particularly affected by increased economic uncertainty, with capital values falling by 6.1%.

Capital values in the retail sector fell by 3.6%, but industrial property was more insulated. It lost just 2.2% over the month, in a reflection of "continued strong demand but weak supply", according to CBRE. As a result of July's poor performance, year-on-year growth for the sector was dragged down to 0.4%.

This slowdown was "widely expected", said CBRE: capital growth was always going to "falter at some point" during 2016, as global economic uncertainty "cast doubt on the likelihood of the strong growth seen in previous years persisting for much longer". The outcome of the referendum "crystallised" that outcome, but it was not the only driver of the fall, says CBRE.

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Estate agent Savills has seen its profits more than halve in the six months to July. Underlying profits for the company's commercial property division fell by 54% to £2.7m down from £5.9m in the first half of 2015. Income declined 23% to £32.1m, largely because of a "significant reduction" in transaction volumes in advance of the EU referendum.

The estate agency pointed out that many of its significant buyers (such as sovereign wealth funds and international private equity funds) decided to stay on the sidelines during the period leading up to the referendum, although this was partly offset by opportunities for wealthy individuals, from areas such as the Middle East, to be more active in buying into the sector.

The firm's Chief Executive Jeremy Helsby says he isn't too worried about the outlook for the commercial property division and expects results to improve later this year. "Assuming that we start to see volumes picking up, which we are seeing at the moment, I would expect the second-half performance to be better than the first half," he told Reuters. Meanwhile, revenue for the company as a whole which operates in Britain, Asia, continental Europe and the US is up 14% to £622.7m, partly due to the strong performance of residential markets around the world.

Wales is set to join Scotland in ending the right-to-buy scheme, a process that allows tenants to buy their council properties. Tenants in Scotland lost the right to buy properties on 1 August, while the Welsh National Assembly is expected to enact legislation within the next year.

Since 1981, more than 138,000 properties in Wales have been purchased by council and housing association tenants under the right-to-buy and associated schemes. This is equivalent to a 45% reduction in the country's social housing stock. (In the UK as a whole, around two million homes have passed from the state to private hands since 1979.)

Critics argued that this was eroding social housing supply, and ending the scheme was a key manifesto commitment for Welsh Labour, the biggest party in the Assembly. "This bill will seek to protect [Wales' current social housing stock] from further reductions," said First Minister Carwyn Jones, who compared the scheme to "trying to fill the bath up with the plug out". He also announced that the Welsh government aims to build an extra 20,000 affordable homes during the current five-year term.

In contrast to policy in Scotland and Wales, Theresa May is continuing with plans to expand the right-to-buy scheme in England to tenants of housing associations. This policy will be funded by forcing councils to sell off "high-value" housing they own in order to pay for the right-to-buy discounts.