Recently, take off the market brought about by the impact is beyond the foreign exchange market, bond market and stock market, began to spread to the real estate market. Since July 4th, the British more than domestic real estate investment fund investors began to suspend redemptions, which caused the anxiety and concern of investors and regulators.
However ,since entering in the first quarter of 2016, however, back in the UK under the influence of the risk, overseas investors to invest in the UK housing market has fallen by 50%. Outflows from British commercial property funds face serious pressure. In April, commercial real estate fund outflows scale up to 137 million pounds, is up to 360 million pounds in May.
After the referendum results, pessimism began leading overseas investors decision-making. In the short term, the market for overseas companies to evacuate, resulting in a decline in demand for commercial real estate in London UK fears, the medium to long term concerns about British economic stagnation suppression of commercial real estate needs. Under the negative influence, the domestic commercial real estate investment fund market value has shrunk by 4.5% to 5%. Commercial real estate funds also came under pressure from the large investors for redemptive assets liquidity depleted. Starting on July 4, liquidity depletion of standard life, aviva, M&G in succession and Henderson global investors in commercial real estate investment fund announced the suspension of all trades, and ban investor redemptions within a certain period of time. The decision will be about 10 billion pounds of assets locking, cause the anxiety.
Pay close attention to market volatility of the bank of England's monetary policy committee, stressed that the commercial property market volatility is likely to be amplified. Before take off the referendum, take off the parties think will lead to commercial property prices fell more than 10%. However, because of commercial real estate transaction frequency is low, the market equilibrium price level need a long time. In this period of time, take off the market pessimism will continue to impact on real estate investment fund. Huge redemptions could lead to a property fund future large-scale sales of real estate to liquidate after lock-up period, which will result in real estate prices down further, form a new round of vicious circle, enlarge market downward pressure.
In fact, each big investment funds in the statement stressed that the current trading halt is in order to avoid the "abnormal market environment damage return on investment". Analyzes believed that in the future any new funds redemption will mean that the fund has to sell real estate to raise funds.
Funds are trying to avoid the real estate market bubble collapse in 2007 when the scene. At that time the British real estate investment funds also face an explosion in investor redemptions. Positive analysis, the possibility of this to happen is not high, the commercial real estate faces the environment is not completely bad. At present, domestic interest rates at historically low levels, the future is likely to further cut interest rates; At the same time, the pound against the us dollar has dip below 1.3, downward pressure is still there. These two factors on the highly international London commercial property market is good, of course
In view of the real estate market fluctuations on the impact of the financial system, the parties think overall impact relatively controllable. Central bank monetary policy committee, said the UK the resilience of the banking system has increased substantially. All bank stress tests are more extreme than the current experience. Bank stress tests in 2014, for example, when the hypothesis "sterling 30%, residential property and commercial real estate fell by 35% and 35% respectively, the British banking system still have enough resources to deal with the situation.
Although looked from the stress test results decline in house prices to control
the impact of the banking system, but the central bank monetary policy committee
are still highly focus on the future development of commercial real estate
market, and use it as one of the core focus on market risk in the future. That
concern makes sense. Optimism on the one hand, although the bank stress tests
results, but the test is mainly concentrated in the seven big Banks, the effects
of negative emotions often exceeds the market expected, the parties are still
worried about falling house prices to the UK's financial system negative impact
than expected; On the other hand, the market can't estimate of commercial real
estate market leverage. The current domestic residential market leverage
relative to control, but leverage commercial real estate is difficult to
estimate. Once the future commercial real estate investment funds in the great
redemption pressure mass selling its assets, domestic prices downward pressure
will be further intensified, the influence of the follow-up development for the
banking industry is still unable to estimate.
