EU referendum could shake London's safe haven status
02-04-2015
The EU Referedum, capital gains tax and a lack of supply were some of the main worries of London's property investment community. Photo: JASON HAWKES
Investors warn withdrawal from the European Union could hit London property market - but are unfazed by general election
Jason Hawkes aerial photography of London
By Anna White, Property correspondent
London's status as an international property investment centre could be shaken if Britain were to leave the European Union, a new report from KPMG has found.
The European Referendum, proposed by the Conservative party for 2017 should they stay in power, is a significant threat to the UK’s commercial and residential property markets, weakening its reputation as a safe haven for both insitutional and private funds.
Two thirds of real estate bosses surveyed by KPMG said that Britain leaving the EU would have a “negative impact on inbound cross-border investment,” twice as many as those who were worried about the political uncertainty caused by the general election in May.
“There is a lack of distinction between the housing policies of the different leading parties [the conservatives and labour party] but no one is sure what withdrawal from the European Union would mean,” said Richard White, head of UK real estate at KPMG. “How would funds react when doing business with London?”
The “spill-over” effect may hit other cities across Europe, he continued, but London, in particular, would see a pause in deal activity as investors assess the impact.
“There is an understandable worry and as such currently outranks the genral election on investors’ lists of concern,” said Mr White.
While the 89pc of respondents felt that London would continue to dominate the European market, despite election and referendum wobbles, they also expressed concerns around capital gains tax changes penalising overseas investors into the domestic market and a lack of supply - in particular offices.
In fact, 60pc of those polled ranked supply as a more of a barrier to investment than political uncertainty.
“Competition for assets remains fierce and we are seeing an increase in investors buying for the long term, which is likely to have a dampening affect on supply,” said Mr White.
Capital gains tax split the body of investors with 40pc arguing that it would deter inward investment, while most felt that global headwinds were having more impact on London than domestic housing policy.
"Global factors such bas the performance of the rouble are dictating investment flows and these are having a greater influence on the market than our own domestic CGT changes," added Mr White.