Real Estate Investors Search for Safe Havens Following Brexit Decision
HomeUnion Issues a Statement From Steve Hovland, Director of Research, on How the U.K.’s Exit Will Impact Real Estate
“After the UK’s surprising vote to leave the EU, the equity markets across the globe entered a tailspin. The gains achieved earlier this week as polling pointed towards a small likelihood of the UK staying were given back, along with the loss of billions in equity. The pound declined 10 percent against the U.S. Dollar to the lowest level since 1985. The Dow, S&P 500 and NASDAQ futures also plunged hours ahead of trading,” says Steve Hovland, Director of Research at HomeUnion.
“While the overall impact of the UK’s exit from the EU will take a several months to become clear, uncertainty will send investors rushing to safe havens, including U.S. Treasuries. As a result, investors and homebuyers can expect low interest rates for longer and a pause on interest rate hikes from the Fed until at least September. Even then, the volume of capital flowing into the safety of the bond market will likely mute any impact the Fed has with a 25 basis point lift in the funds rate. The average 30-year mortgage rate is expected to remain below 4 percent into 2017,” he shares.
“The wildcard with the UK’s exit from the EU is global contagion. A downgrade in the UK’s credit rating by the S&P, which is very likely, could tip the country into recession. The rest of the globe is also barely growing, and a financial shock could diminish confidence in the central banks and send much of the world into contraction,” says Hovland.