The Brexit May Impact U.S. Multifamily
Great Britain’s vote to leave the European Union is one of the biggest shifts in recent history. Known as the Brexit, the British economy took a dive after the 52% – 48% vote and the future remains unclear. That’s because no one has left the EU, ever! Multifamily in the U.S. could stand to gain from the vote. While analysts have differing opinions, there’s a chance the Brexit may give U.S. multifamily a boost. Here’s how:
- The Pound Has Fallen – The U.S. has one of the most lucrative multifamily markets in the world. If the pound continues to fall, British real estate may follow. Investors may turn their eyes across the pond to invest in various communities and projects. KC Sanjay, leading economist and analyst at Axiometrics, states “The (multifamily) sector accounted for 25%-30% exposure of all commercial real estate portfolios in 2015 and the first quarter of 2016 – meaning multifamily is bringing in more than its share of investment compared to other sectors.” It would make sense to switch focus and with so many diverse offerings in the industry, the U.S. could be a safe bet.
- An Extension of Low-Interest Rates – The Federal Reserve had planned on raising interest rates this year but has yet to do so. Globally, the impacts of the Brexit have yet to unfold, so there’s good reason to hold off on raising rates out of fear of recession. Greg McBride, Bankrate’s chief financial analyst predicts: “Mortgage rates will tumble following the Brexit vote, possibly hitting new record lows.” This could be big news for multifamily, especially for portfolio expansion and new development.
- A Chain Reaction – The last two points hint towards a safe and stable invest in U.S. multifamily. If the British start investing, there’s a good chance other foreign investment may follow. For example, the Middle East has a history of investing in London. If they see the British shift towards the U.S., they will more than likely follow suit. A chain reaction of foreign investment may begin, giving the industry a stimulus shot to the arm. On the flip side, the U.S. might see an opportunity to invest in British real estate if the market makes sense.
The previous points made are pure speculation and depends on global markets holding on. But the right factors are in place to make it a reality. So will the Brexit turn into the Brenter for U.S. multifamily? Only time will tell, but be ready for a potential British Invasion!