London, UK is known as one of the worlds most sought out markets for foreign capital. However, things have now changed and possibly taken a sudden turn for the worst, and you can blame it all on BREXIT.
What is BREXIT?
BREXIT is a catchy name for a very serious situation. It refers to the referendum held in the UK on June 23rd, during which the United Kingdom voted for or against leaving the European Union, 63 years after joining it. A 52% majority voted for leaving the EU, which means that England is to break off from the European Union. No nation state has ever left the EU before.
The permanent and long-lasting effects of BREXIT have yet to be determined as Britain negotiates a withdrawal agreement with the EU. However, many predict that with the shaky economic and political environment in Britain, Canada comes out on top with a more stable economy and a better promise for one’s investment. While Britain’s prime minister who pushed for BREXIT has announced his resignation, our newly elected PM, Trudeau, is well-accepted worldwide. The Guardian reports that stock markets around the world have plummeted and the UK is facing the threat of recession. Therefore, people may start looking to buy houses, condos and commercial real estate here instead, especially in two of Canada’s hottest markets: Toronto and Vancouver, which have already seen heightened interests due to an influx of foreign money.
According to Knight Frank LLP, 3 out of 4 newly built central London homes in 2013 were purchased by foreigners. Where will this money be redirected now that more foreign buyers are hesitant to buy London real estate? Possibly in the more stable and promising Canadian economy that doesn’t face such risk of inflation. However, it’s important to consider that the remarkable drop of the British pound may attract bargain seekers. Only time will show how exactly everything will unfold.
The Bank of Canada will keep interest rates low. As BMO chief economist Douglas Porter and senior economist Robert Kavcic explain, low interest rates will be partially caused by the fact that certain sectors of our economy, such as our export to the U.K. responsible for $16 billion in products, will feel the post-BREXIT impact. Low interest rates are good for the real estate market. For now, the Bank of Canada has left interest rates at the all time low 0.5%.
July 13, 2016
Team Riaz Ghani