Residential property least likely to be affected by Brexit

Residential property least likely to be affected by Brexit [Photo: adempercem via iStock]

The commercial property market in the UK is far more likely to be negatively affected by the British public's decision to leave the European Union (EU) than the residential sector, according to new reports, which suggest the latter should continue to perform relatively well. 

S&P Global Ratings, which looked at the industries nationwide that have been most volatile ever since the referendum in June, said that the most likely outcome for the UK is that commercial stock will see a far more dramatic fall in price. Although it has also recently stated that it would expect to see some degree of fall in valuations for residential stock in the coming 18 months, even if only temporarily. 

Commercial property has been perhaps the most volatile of all industries in the UK since Brexit was announced, with property funds choosing to hedge their bets and look elsewhere other than the UK for the foreseeable future. 

With this in mind, S&P Global Ratings said: "We anticipate the drop in valuation will be on average less dramatic for residential real estate assets than for the commercial sector, although it will vary between segments and geographies.

"High end and luxury apartments in central London were already experiencing some negative trends in the past few months. We would expect this situation to continue given that this segment relies more heavily on foreign investors, which we expect may be even more hesitant buyers now."

The report also went on to state that those working with existing stock are less likely to feel the Brexit effect in the coming months than house builders. Although the market for new homes has remained relatively healthy since the vote in June, S&P said its close relation to the economy would suggest it may tail off at some point. 

"Some deterioration cannot be ruled out, especially because the sector is strongly correlated to GDP growth, unemployment rates, and consumer confidence, which are all expected to be negatively affected in the coming months and years," it said.