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Property firms in London 'could be negatively affected by Brexit'

Published 16/08/2016

London's status is key to the success of the capital's property market
London's status is key to the success of the capital's property market

London property firms could see demand tail off if the Brexit vote weakens the capital's position as a global financial hub, a ratings agency has warned.

Fitch Ratings said the wider property sector will also endure a sustained bout of pressure following Britain's vote to leave the European Union , but the move was unlikely to trigger a ratings downgrade.

" Commercial REITS and property companies that own large office developments in the City of London could be negatively affected by Brexit if London's position as a global financial centre is weakened, reducing demand for office space," the report said.

"Much of this will depend on the negotiations with the EU."

The report said mounting uncertainty surrounding Britain's exit from the European Union - including when the UK will push the button on Article 50 - was harming market confidence for selling and leasing property.

But it said UK housebuilders would have the "adequate flexibility in the short to medium term" to cope with a slowdown in demand.

Britain's biggest housebuilders have endured a torrid time in the wake of the Brexit vote, with the share prices of Persimmon and Taylor Wimpey still 17% and 20% lower respectively than before EU referendum result.

However, anecdotal evidence and studies suggest that the London property market remains strong despite Britain's decision to ditch the EU.

A study from property giant CBRE found the amount of office space leased in London jumped 24% month-on-month in July to 980,400 sq ft.

There has also been reports that foreign buyers are swarming London's commercial property market as they look to capitalise on the collapse in sterling following the EU referendum, with Asian and US investors at the front of the queue.

Property giants CBRE and Colliers have both seen a surge of interest from buyers from as far afield as South Korea and Taiwan as the value of the pound continues to nosedive, with London still seen as a ''safe bet'' despite Britain's vote to leave the EU.

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