Boston realty to benefit from UK’s exit from EU

TIMES NEWS SERVICE

Britain’s vote to leave the European Union may be causing turmoil in the capitals of Europe and in world stock markets. But it could actually benefit the real estate market in Boston. Here’s how:

Housing
Mortgage rates — already quite low — could stay down. The reason? Uncertainty about the economy and the stock market drives investors into bonds, which pushes interest rates down.
Just Friday morning, rates on 10-year US Treasury bonds fell nearly two-tenths of a percentage point, which will likely translate into even lower mortgage interest rates in the weeks to come. That could help homeowners refinance and make it slightly easier for buyers in Boston’s pricey housing market. But it’s hard to say how long the dip might last.
“At this point, it is unclear whether this will just be a short-term disruption, or whether it will have a longer-term impact,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association, in a statement. “Our best guess at this point is that the impact on the mortgage market will be to keep mortgage rates lower for longer.”
Meanwhile, the Brexit vote triggered a rise in the value of the dollar. If that keeps up, it will be more expensive for Europeans to buy US real estate. Buyers from the UK alone spent $3.8 billion on US homes last year, according to a survey from the National Association of Realtors, with Massachusetts being their third-most popular destination.
Less foreign competition could make life easier for local buyers, especially in neighborhoods popular with the trans-Atlantic set. But it could also remove a slice of high-end buyers who help boost values in wealthy suburbs and luxury condo buildings.

Commercial real estate
Foreign capital has flowed into Boston real estate in the last few years, with big institutional investors from Germany and Norway buying trophy buildings here in search of a safe haven. That could well accelerate, said Frank Petz, who oversees capital markets in New England for real estate firm JLL.
“The US is viewed as a safe place to invest, and Boston sits near the top of the list of target cities in the US,” said Petz. “We offer diversification that big investors like and also the industries that are driving our economy right now.”
Even with the stronger dollar, European money that might have invested in, say, London real estate, may instead seek stability overseas. Petz said long-term Boston real estate will remain a desirable investment, especially relative to weak returns in Europe. That could continue to drive up prices for high-profile buildings here.

The big picture
Of course, all of that optimism is predicated on both the Boston and broader US economy weathering whatever comes in Brexit’s wake. There is no guarantee of that.
If job growth in Boston — which has closer economic ties to Europe than other parts of the nation were to stall, demand for office space would likely sag, too. And if the sledding truly gets rough, it could cool off Boston’s hot housing market as well, sapping demand despite low interest rates.