A recent global report by investment bank Citigroup has named Australia and Singapore as the two largest markets set to reap the benefits of United Kingdom’s exit from the European Union.
The vote on June 23, commonly known as Brexit, has sent markets tumbling and shudders through what investors regarded as a safe haven for assets.
Asset managers are expected to move funds out of shaky European and British hubs, into the stable strongholds of Australia and Singapore, the bank said in a report.
“Direct real estate markets have entered a phase of paralysis as the market adjusts post the Brexit vote in what is now a challenging market,” the Citi report explained.
“Market collapses reveal the best times to buy (but) the unprecedented nature of this situation makes picking the bottom of the recent UK stock negativity difficult,” it added.
The prices of European property stocks, especially those of offices and shopping malls, have dropped by four to eight percent following the vote.
Property investors are holding back as they think more businesses will downsize operations in the unpredictable market, according to a report by The Australian.
Citi predicts that 30,000 jobs could be lost in the city of London, resulting in a 16 to 20 percent drop in office rents.
In contrast, yields in Singapore's office market have tightened by 10 per cent post-Brexit. The bank expects that this trend will continue, once more operations in London start to seek stability afield.
Although Australia remains an attractive destination, investors may be discouraged by the government’s recent tightening of criteria for foreign investment, said Citi analyst Philip Cheetham.
“A withdrawal by multiple lenders in providing finance for (foreign) investors, new foreign application costs, higher financing charges for local investors and the imposition of state-based stamp duty charges for foreign buyers … are some of the headwinds the sector has faced,” Mr Cheetham said.
Check out The Australian for more information.
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