Brexit - reaction or repetition?
NEARLY a decade on from the global financial meltdown and its subsequent property crash, it’s not unsurprising that there are faint whisperings about the fear of a repeat of similar types of turmoil following the unexpected result of the Brexit vote that will see Northern Ireland leaving the EU.
We all know the markets hate uncertainty, as the post-vote reaction of the FTSE and other European share indexes proved with, albeit only short-term, fluctuations after the result was announced.
The subsequent devaluing of the pound against the dollar further proved that, on the macro-scale, changes to the global economic landscape post-Brexit were inevitable and may well be far-reaching.
Some of the more ominous predictions have been proved to be unfounded in the short-term and officials therein have made a rapid U-turn, now saying the British economy will grow faster than Germany and France in the next two years.
But nearly all economists agree that the effect of the Brexit vote has been to reduce growth predictions for the UK and increase uncertainty, hence why we stood firmly in the remain camp prior to the vote. There will be challenging times ahead for commercial property.
We now have to accept the will of the people and try to navigate our way through uncharted and uncertain waters. The latest comments by the IMF, now downgraded in the news media to “Brexit throws 'spanner in the works' of global growth”, show that the IMF is now taking a more measured approach to its reporting.
It is also important to emphasise and reiterate that none of us are sure of what the future holds and we should look at a wide range of information before drawing conclusions.
So among all this crystal ball gazing, prediction, opinion and analysis, how will the vote effect Northern Ireland? If you look at the fundamentals, and don’t believe the hype, the conclusion most likely is that we are experiencing a reaction to changing market conditions and not a repetition of 2007.
Firstly, unemployment is down and continuing to fall. The number of people claiming unemployment-related benefits has fallen by 28,000 since the most recent peak in February 2013. The claimant count in Northern Ireland decreased for the third consecutive month in June as the number of people claiming unemployment benefits fell by 600 to 36,700. The jobless total is now the lowest for eight years.
Follow that up with improving regional bank performance; the underlying performance of our regional banks continues to improve, while at the same time impairments reportedly continue to fall.
We should also remember that the banking sector has been heavily regulated since 2007 and, in the main, the banking sector has been risk-averse as anyone trying to get a commercial or residential property loan will be all too aware
The combination of reduced unemployment, and regulation of the banking sector, paints a significantly different picture from 2007.
The reactionary among us can take solace in the fact that lessons have been learnt over the last decade and Northern Ireland’s strengthened economic fundamentals will assist the economy in adapting to a future out of the EU - and we’ll avoid a repeat of the crash of 2007.
This is not to say that the post-Brexit era for Northern Ireland will be without its challenges, with corrections across all our markets to be expected. What exactly we are set to experience remains to be seen, but we can say that we are in a better place to adapt to the coming change than we were in 2007.
:: Declan Flynn is managing director of Belfast-based commercial property agency Lisney, which works on behalf of many of Northern Ireland's most significant investors and developers as well as major retailers and businesses.