Brexit pound slump good news for UK property owners as auction sales boom

Demand is now soaring, reversing the trend that saw billions rapidly pulled out of commercial property funds just after the referendum

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Commercial property auctions are proving an unlikely bright spot in Britain's real estate market where a steep drop in sterling has attracted overseas buyers and local investors are as yet unfazed by potential fallout from Brexit.

Britain's £900bn commercial real estate market was an early victim of the financial market turmoil that followed Britain's vote in June to leave the European Union.

Retail investors quickly pulled money out of commercial property funds just after the vote, causing a temporary freeze on £18bn in assets.

In July, British commercial property values fell by 2.8 per cent, according to the IPD real estate index compiled by MSCI, the biggest fall since March 2009, highlighting a sharp drop in investor confidence.

Average commercial property values have fallen around 3.5 per cent since the 23 June vote and year-to-date returns tracked by the IPD index are hovering below zero.

But for commercial property auctioneers who focus on smaller properties rather than trophy assets like London's skyscrapers or regional shopping malls, it is a different story.

Allsop, Britain's biggest auctioneer, achieved its biggest sale volume in a decade at a sale on 10 October. Rival Acuitus on 13 October recorded its largest-ever auction since spinning out of Jones Lang LaSalle in 2010.

Average rental yields at both sales fell sharply compared with July. A fall in yield - the ratio of the annual rent to the purchase price - shows demand is on the rise.

Around 500 people attended the Allsop sale at The Berkeley, a luxury hotel near London's Hyde Park, while a further 6,000-odd investors were plugged in by phone or internet, including overseas buyers, the company said.

Reuters

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