Could Brexit vote see overseas rivals poach East Mids property firms?
Some of the region’s listed property companies could be exposed to takeover bids from overseas rivals, according to one local expert.
David Smith, director at Strata Real Estate, says the drop in the share price of some of the big land owners could be irresitible for those looking to expand by acquisition.
Shares in some of the region’s housebuilders and REITS fell by up to 40% immediately after the Brexit vote. Since then prices have recovered bur shares still sit around 20-25% lower. That, says Smith, compares to the FTSE 100 and FTSE 250 which have held up relatively well.
“Investors took flight due to the fear that a recession triggered by leaving the EU would eventually affect the occupier market and also see demand for new houses fall.”
David Smith
Smith says it is still too early to gauge what the impact will be on the economy. He says that if the US dollar/sterling exchange rate does not recover, then the price of oil will increase, affecting both industry and household expenditure.
He added: “Lower share prices for both the major and second tier property companies offer investors an opportunity for indirect participation in the market at a sizeable discount to asset value. Some listed property companies may also be more vulnerable now to takeover approaches, most likely from overseas investors”.
“Some agents suggest that commercial property prices could selectively fall by up to 20% in the regions, and more in London where commercial and residential prices have seen the highest price growth in recent years.”
Performance of selected construction and real estate shares since June 1, indexed to the day of the EU vote:
“Shares in REITs with exposure to the London office market could therefore see the greatest downsides. Fundamentals suggest that shares in housebuilders should be more resilient. Since the credit crunch they have repaired balance sheets with lower debt levels and more cash. Trading has been buoyant over the past couple of years, help by Government incentive schemes like Help to Buy, and there is still a structural shortage of housing.”
