A rollercoaster week for United Kingdom real estate prompted by U.S. President Donald Trump's sweeping global tariff announcements has ended with stock prices slightly down on where they were before the drama of the past 10 days or so, and the market none the wiser as to what it all means.
The president's confirmation that he would pause his sweeping tariff scheme for 90 days on Wednesday has seen global stock markets recover some of the dramatic losses of the last few days, and United Kingdom real estate has been no different.
By 11:55 in the morning in London on Thursday, the 10th day of April, the United Kingdom's FTSE 350 real estate index tracking large and midcap stocks in the sector, was up 5.93% to trade at 368.32. That is broadly where it had been on the second day of the month, when the tariffs were announced, at 374.06p.
On the third day of April, as reported, the index lifted as investors in the exchange got a first chance to react to Trump's "Liberation Day" introduction of worldwide trade tariffs. The president has applied a 10% tariff on all United Kingdom exports to the United States. By 3:15 pm that day, the FTSE 350 was up 1.6% to trade at 380.12p having hit a near 52-week high of 382.25p earlier. That rise was in direct contrast to the wider United Kingdom stock market, with the FTSE 100 down 1.59%.
On the Friday the fourth, the FTSE 350 lost those gains and by 3:57 pm on the following Monday, it was firmly in negative territory, down 3.91% again that day at 348.40p. It reached a nadir of 343.45p on Wednesday the ninth of April as China and the European Union pledged retaliatory tariff rises before the President's announcement of a pause led to a rally.
The United Kingdom's leading stocks have pretty much followed that trajectory. Landsec, for instance, was up 6.83% to 532.50p by 12:15 on Thursday afternoon in London, down from the 563p it briefly reached during Thursday's bounce and also from the 550.60p it was trading at on the Wednesday before Trump's initial announcement, but up from the floor of 499.90p it hit on Wednesday the ninth of April before Trump announced the tariff pause.
The momentous week has left seasoned real estate investors scratching their heads to find answers as to what it will eventually mean for the market. The only people who seemed to benefit immediately were the short-sellers of equity stocks.
What is clear from the movement of the FTSE 350 real estate index is investors' initial sense that United Kingdom real estate may prove a hedge to other asset classes which are more exposed to President Trump's tariffs had given way to wider concerns about the impact of a potential global recession and the continued drag on world financial markets.
Ezra Nahome, chief executive at Lambert Smith Hampton, the national commercial adviser that has bought two leading brokers in the past week, said broadly the outcome should aid United Kingdom real estate: "There are two things that drive the market. The first is an improving certainty around growth opportunities, and that remains very spasmodic with only pockets of this in certain sectors. The second is interest rates and everything now points to a reduction in interest rates as really the only lever that can be used to drive activity and growth. That could have a big positive impact for real estate.”
Tom Bill, head of United Kingdom residential research at Knight Frank, agrees that a silver lining is the likely increase in the speed at which interest rate cuts arrive. "As buyers adapt to higher rates of stamp duty from this month, they also face headlines about a global recession sparked by US tariffs. While that may not be conducive to positive sentiment, the good news is that markets now expect the Bank of England to cut rates three times this year rather than two to deal with a possible economic slowdown."
Bill added the caveat that the risk is that tariffs may ultimately prove to be inflationary and the "spillover effects mean upwards pressure on mortgage costs" in the United Kingdom.
Data compiled by the European Public Real Estate Association showed that as the week progressed Europe’s listed real estate sector had seen pricing slip 4.8% but had outperformed broad equity markets, as reported.
The figures, from the Thursday of last week to the close of trading this past Monday, showed, EPRA suggested, that real estate had been caught up in a general sell-off in equity markets even though real estate companies are not directly affected by trade tariffs. It argues the decline exaggerates the likely impact on real estate companies' operational performance.
“The sector is, of course, not immune from the indirect impact that higher tariffs will probably have on economic growth, inflation and employment, most particularly since these may affect tenants," explained Dominique Moerenhoet, chief executive officer of the European Public Real Estate Association, before adding that listed real estate companies in Europe offered protection against inflation, since leases are indexed against it.
Writing for CoStar News this week, Mat Oakley, head of United Kingdom and European commercial research, Savills, said the immediate outcome is likely another unwelcome reason for businesses to pause before investing.
"I am pretty certain that the tariffs announced on 2 April will not be the ones that we end up with, but how long it takes for the final deal to emerge is another kick to the roots of those potential green shoots. Yet again, we have the perfect set of reasons for investors who might be looking for a justification to not make a decision, to delay their sale or purchase until 'things are clearer'."