Forget Brexit – UK property is a buy

Share prices in the property sector crashed by more than 20% in mid-2016 as soon as the news of the Brexit vote came through. Yet the market has performed much better than many expected. Property returns have fallen in the last year, but have still been positive.

Share prices in the property sector crashed by more than 20% in mid-2016 as soon as the news of the Brexit vote came through. In the year following, panic has been replaced by caution. Share prices have recovered, but not to pre-vote levels, and they mostly stand well below the peaks reached in late 2015. Economic uncertainty means that demand from new tenants is subdued and few new developments have been announced. Yet the market has performed much better than many expected. Property returns have fallen in the last year, but have still been positive.

Confidence in the long-term outlook has been demonstrated by a series of eye-catching transactions. In March, the "Cheesegrater" building in the City was sold to CC Land for £1.15bn while in July, records were broken when Chinese food giant Lee Kum Kee paid £1.3bn for Land Securities' "Walkie Talkie" building. And while house prices have flattened out, this trend was apparent before the Brexit vote and is attributable to tax hikes and to prices, particularly in and near London, becoming over-extended. Retailers are becoming increasingly cautious, to the detriment of rentals, and hence valuations of shops and shopping centres, reports estate agent Savills but this is at least as much attributable to the growth of online shopping as to weakening confidence. A sharp fall in investment in new space in recent years has limited the impact.

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Max King
Investment Writer

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.

After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.