Investors don’t like uncertainty, and they are getting plenty of that in the United Kingdom’s June 23 referendum on membership of the European Union. The outcome continues to be impossible to predict.
Let’s stick with the Brexit poll tracker in The Financial Times that I used last time to show how close the two sides are. At the time of writing, the poll tracker shows an overall 46 percent in favor of staying in the E.U. and 43 percent in favor of leaving, with 11 percent undecided. So we are in margin-of-error country. Of 62 polls carried out so far this year, 36 found a majority for remaining and 19 for leaving. Seven were tied. It bears repeating that a simple majority on the day is all that is needed.
Significant in the poll tracker is the variance; for example, the most recent two polls listed showed remain/leave/undecided numbers of 44/45/11 and 42/41/16, respectively. Even psephologists will have trouble working anything out from that.
Investors are reacting to the impasse by sitting on their hands; the U.K. investment markets have gone into sleep mode and U.K. real estate markets likewise, certainly as far as foreign investors are concerned. Foreign exchange rates — an important component of the buying/selling decision for foreign investors, remember — are hovering between not as good as they were before the referendum was announced, and not as bad as they could be. The euro is around 1.26 against the pound, and the dollar is around 1.45. It’s a bit like the phony war of 1939.
Market participants are looking forward to some form of normal service being resumed after June 23, regardless of the result. Of course, depending on the result, service could be anything but normal. It could be time to start thinking about the implications of the result for your investment strategy. But you’ve done that already, haven’t you?
The views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.
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Richard Fleming is editor of Institutional Real Estate Europe.
