The Bartlett Real Estate Institute


Brexit shifts value perspective, says Bartlett Real Estate Institute Chair

11 February 2019

BREI chair Professor Yolande Barnes was among real estate experts canvassed for a Financial Times article on the potential post-Brexit housing market.

A birds-eye view of a colourful neighbourhood

For the article, published on January 17, the FT asked real estate experts to compare previous housing crashes with the current situation.

Professor Barnes told the newspaper that Brexit, alongside other global, financial, social, demographic and technological changes, has made us reconsider the fundamental value of a home.

She said relying on “market exuberance” to justify the value of a home is unstable and unsustainable.

In considering what the future of the UK and other western housing markets might look like, Professor Barnes cited Japan, where house prices have remained slumped since the credit boom of the 1980s was followed by the asset price bust in the 1990s, as a possible scenario for the UK.

Japan’s long period of low inflation and falling, then permanently low, interest rates was about 30 years ahead of financial trends in the US, the UK and Europe, she said. Real estate capital values remained on a “high (if bumpy) plateau”, she claims but, after yields stabilised, there has been no capital growth without rental growth.

Professor Barnes added, however, that this new world of low interest rates and low inflation was always going to be inevitable, with or without Brexit. What the effects of Brexit will determine is the way in which rents grow – or fall – in different sectors and in different locations. It is this that will determine future capital growth, she claims.

Image: Paul Hanaoka, Unsplash