(Chicago) – October 11, 2016 — Mark Zandi, chief economist at Moody’s Analytics, told attendees at The Counselors of Real Estate® professional association’s annual convention in Washington, D.C. that despite many bank and analyst predictions of a world recession if the U.K. voted to leave the European Union, the global economy is actually “OK for now.” He said the timing of Brexit completion will likely determine stability of economies throughout Europe as well as the U.S. over the next three to five years.
Dr. Zandi led discussion about Brexit and its economic impact with a panel of high level real estate advisors representing France, Germany, Turkey, the U.S., and the U.K. He said the overall economy is “amazingly resilient,” because very little negative effect has been felt so far in Europe or the U.S. as a result of the vote. He noted that the European economy is actually growing and the U.S. is stable.
But, he said, it’s too early to tell the full effect Brexit will have until the process officially begins, which could be potentially longer than the timing called for in the Lisbon Treaty–within two years of an exit decision by any country. The U.K. vote was in June; the U.K. exit team has not yet been formed.
In the U.K., some real estate buyers are asking for an “uncertainty discount” on property prices to help manage risk against potential market impacts, according to Don Benningfield, CEO of Pangaea Advisors, Charlotte, N.C. Despite this, he said the financial market is stable and open, with a significant amount of money available. He added that looking to the future, while no one can predict the market, “certainty is always a positive, whether the news is good or bad.”
France is still reeling from recent terrorist attacks, according to Marie-Noelle Brisson, CRE, senior international advisor at Cushman & Wakefield, who presented her view through the eyes of a Parisian, recently relocated to the U.S. “As a result of the attacks, France is obsessed with security,” she said. “The hospitality and retail sectors are suffering. The level of investments in 2016 will certainly be lower than in 2015, which had been a very good year. As in many other European countries, France will have general elections next spring–and contrasted campaigns have already started. It is a very emotional time in France right now,” she added.
In Germany, there is concern about low interest rates as well as immigration, according to Ralf-Peter Koschny, CRE, member of the directory board of BulwienGesa AG, Hamburg. He expressed concern about the Brexit effect on other countries in the E.U. which are closely watching the effects of the U.K. departure. He noted that although immigration is a strain on countries, “We can’t just sit at home and say that’s not our business.” He added, “Consumer spending in Germany is rising because people see there is no point in saving money right now.”
Guniz Celen, CRE, CEO of Celen Corporate Property Valuation and Counseling in Istanbul, said Turkey has officially accepted 2.5 million Syrian refugees so far, but in reality it is nearly four million. She noted that immigration has a substantial impact on the cities and their real estate industry; there are 25 refugee camps in 11 cities. “Demographic shifts should be expected to continue,” she said. When asked by Dr. Zandi why Turkey has accepted such a large share of the more than 12 million people who have left Syria, she said, “we cannot abandon people who are running away from war and who need our help.” She said the costs to Turkey and the European Union are great: Turkey has already spent 11 billion Euros on refugees and is awaiting three billion from the EU.
Graham Parry, group research director of Grosvenor in London provided a different view. He said, “Factors such as rising nationalism and populism are becoming a more important influence in global politics. “In the U.K., so far nothing has really changed,” he explained, “but the U.K. can’t unravel 40 years of integration without a recession.” He said the European Union is still “a bit of an experiment” and predicted that while work on the U.K. exit is likely to begin next year, “It may be well into the next decade before it is completed.” The 2017 elections in France and Germany may also complicate the European economy and the European Union itself, he said.
The Counselors of Real Estate organization and its members are known for presenting objective, balanced views on issues of critical importance to real estate and the world. Members of The Counselors include real estate senior executives and business owners in the United States and more than 20 other countries.
The Counselors of Real Estate®, established in 1953, is an international group of high profile professionals including members of prominent real estate, financial, legal and accounting firms as well as leaders of government and academia who provide expert, objective advice on complex real property situations and land-related matters. Membership is selective, extended by invitation only. The organization’s CRE (Counselor of Real Estate) credential is granted to all members in recognition of superior problem solving ability in various areas of real estate counseling. Only 1,100 people in the world hold the CRE credential. For more information, contact The Counselors of Real Estate, 430 N. Michigan Avenue, Chicago, IL 60611; +1 312/329.8427; http://www.cre.org.