WASHINGTON, D.C. — Mark Zandi, chief economist at Moody’s Analytics, believes that despite bank and analyst predictions of a world recession if the United Kingdom voted to leave the European Union, the global economy is actually “OK for now.” He adds that the timing of the Brexit completion would likely determine stability of economies throughout Europe as well as the United States over the next three to five years.
Zandi’s comments came at The Counselors of Real Estate annual convention, held Sept. 25-28 in Washington, D.C.
Zandi led discussion about Brexit, when British voters decided on June 23 to leave the E.U., and its economic impact with a panel of 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.
Long-Term Process
But, Zandi said, it’s too early to know the full effect Brexit will have until the process officially begins, which could potentially be 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 and the U.K.’s exit team has yet to be 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 in Charlotte. Despite this, he said the financial market is stable and open, with a significant amount of money available. Benningfield added that 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 who 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.”
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’s effect on other countries in the E.U.
He noted that although immigration is a strain on countries, “we can’t just sit at home and say that’s not our business. Consumer spending in Germany is rising because people see there is no point in saving money right now.”
Political Factors
Guniz Celen, CEO of Celen Corporate Property Valuation and Counseling in Istanbul, said Turkey has officially accepted 2.5 million Syrian refugees so far, but the real, unofficial total is nearly 4 million. She noted that immigration has a substantial impact on the cities and their real estate industry as there are 25 refugee camps in 11 cities.
“Demographic shifts should be expected to continue,” she said. When asked by Zandi why Turkey has accepted such a large share of the more than 12 million people who have left Syria, she added, “we cannot abandon people who are running away from war and who need our help.”
Turkey has already spent 11 billion Euros on refugees and is awaiting 3 billion from the E.U. Graham Parry, group research director of Grosvenor in London provided a different view.
“Factors such as rising nationalism and populism are becoming a more important influence in global politics,” he said. “In the U.K., so far nothing has really changed, but the U.K. can’t unravel 40 years of integration without a recession.” Parry added that 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 added.
— Haisten Willis