Until the Brexit summer of 2016
Until the Brexit summer of
2016, the uptrend in prices was relatively subdued. However, this is no longer
the case. In 2017, prices for existing and new apartments were up 15% and
almost 17% yoy, respectively. Rents for re-let apartments also rose strongly, by
8%. These jumps might to some extent be due to the expectation that numerous
jobs will be shifted from London to Frankfurt. However, there is considerable
uncertainty about how many jobs will be moved in the end (there has been
speculation about more than 10,000 additional jobs). As a result, landlords and
sellers have more pricing power in a market where demand is high. We believe
that the estimate of more than 10,000 new jobs is overly optimistic for two
reasons.
First, ex-Prime Minister Tony Blair recently called upon his Labour
Party to try to work against Brexit and towards a referendum about the result of
the negotiations with the EU. The “Brexit effect” might therefore be much smaller
than assumed today, not least because several British politicians are urging the
UK to remain within the EU single market despite Brexit. Second, a Financial
Times article written in December 2017 suggests that the banks will shift fewer
than 4,600 jobs from London to Frankfurt due to Brexit.4 Based on this range of
scenarios and data, we believe that our Brexit analysis of 2016 (in which we
assume in our baseline scenario that 5,000 additional employees move to
Frankfurt) is still realistic
EU Forecast
euf:ba.18.j:161/nws-01