Nery Alaev writes about Brexit, in a continuation of previous articles.
One author has come out to say that the ‘Brexit’ vote on 23rd June may not actually happen and has laid out the case for the process being disrupted because it may cause too much disruption to all parties involved.
I’ve reacted to this standpoint and have drawn my own conclusion on the issue.
Too much to lose?
In his article explaining the standpoint that Brexit won’t happen, Gideon Rachman points out that the result was very close (52% voted to leave, 48% to remain), as well as the contention that the EU has a lot lose if Free Movement is disrupted due to Brexit.
This is especially true for Eastern European nations such as Poland, which has a considerable diaspora of its citizens living in the UK.
The issue with this is simple however – if the UK (one of Europe’s largest economies) is able to leave and negotiate favourable terms, what stops others from leaving? Anti-EU sentiment isn’t as strong on the continent as it is in the UK, but it’s strong enough to pose a threat.
As for technical and legal reasons, the status of the much discussed ‘Article 50’ may play a role in the dampening of the UKs exit from the EU.
An article in the International Business Times indicates that thanks to Parliament’s authority over the triggering of article 50 (which begins the process of EU disassociation) as well as the fact that the vote isn’t (yet) legally binding, there may still be a disruption.
Again, the issue of sovereignty arises. If the vote is struck down in Parliament, there will be a major constitutional crisis in the UK as it means that democracy has been undermined proper.
My thoughts on Brexit
In a previous presentation of mine, I summarised my thoughts on the Brexit issue – they are as follows:
My opinion still is (especially given the stepback of Nigel Farage and Boris Johnson) that Brexit will not happen and that the UK will renegotiate some terms of its EU membership so that the majority of the population will be put into another referendum which a large part of British voters are very likely to accept (changes to immigration etc.).
The situation is unpredictable, but this seems to be the most likely scenario to me right now.
In regards to property, investments in the UK on the hand should become more attractive because the pound is cheaper. But this is only for foreign investors, which are important for the London market. Many institutional companies may still be more hesitant though, as the political uncertainty may be too large for them – this could lead to lower investment volumes.
Some parts of the market that were weigh overpriced anyway before the Brexit vote though should see a correction, as the Brexit vote provides a further catalyst for a correction in those submarkets of the real estate sector.
Nery Alaev is the current Director of ESN Investments GmbH, which engages in acquisition and development of commercial and residential property in Germany and Austria.