Stirring The Pot Of Opportunity In Euroland
So the Brits are leaving the EU.
At least that’s how they voted last week. Today, though, it seems some from both sides of the argument would like to revisit the discussion.
Both Remain voters and some Leavers have petitioned Parliament to consider holding a second referendum. Several Leave voters have been quoted as saying they’d like to change their votes. It seems they didn’t understand the consequences of the votes they cast the first time.
One Brit I heard interviewed told the reporter he didn’t think his vote would matter so he voted for Leave. Darwin fails us again.
Meanwhile, Europe and the rest of the world are trying to think through what an independent U.K. will mean. Comments from politicians on both sides of the vote would make for a great Seinfeld episode.
The Leave camp is telling Brits that nothing will change for the EU citizens living and working in the U.K. nor for the U.K. citizens living in the EU. They’ve also been quoted suggesting that trade between the U.K. and the EU will carry on status-quo. You have to wonder if the Leavers ever even considered the consequences of the fight they’ve just won.
They seem to think they can have their cake and eat it, too.
Some EU politicians sound as naïve, insisting that the U.K. must go immediately.
The official disentanglement process is meant to stretch over two years. The Treaty of Lisbon stipulates the various negotiations required for the divorce. Part of the negotiations involve the movement of people and goods. Don’t expect the EU to roll over for the U.K.
As in all divorces, both sides will lose financially. Already some of the financial ramifications that weren’t comprehended by the populous in advance of the vote are in the news.
Low-cost airlines in Europe have allowed the working- and middle-class masses cheap and easy access to other parts of Europe for vacations (holidays, as the Brits would say). The underlying premise that allows these airlines to operate in the EU is an open-skies law permitting EU airlines to fly freely among all EU countries.
EasyJet, which is a British company, is also the second-largest airline in France. Meantime, Ryanair, which is an Irish company, is the largest low-cost airline operating out of the U.K.
Both of these companies will have to consider how to proceed with their current operations post-Brexit. This will mean negotiating with the appropriate regulating body. It also likely will mean increased airfares for in-Europe flights.
Working-class voters in the U.K. probably didn’t think much about the cost of their summer holidays when voting to Leave (polls show that lower-income workers were more likely to cast Leave votes). Maybe this is one reason some of them are now suggesting they’d like a re-vote.
For the rest of us, it’s uncertainty over the future of both the U.K. and Europe that has pushed down stock prices worldwide along with the pound and the euro and that, I believe, will push down real estate prices, as well, both in the U.K. and in EU vacation destinations where Brits have lately been inclined to buy retirement and second homes.
One British colleague earning U.S. dollars is looking to buy British currency now that the pound sterling has hit a 30+-year low.
If that idea appeals to you, too, you could consider an account at the London desk of Barclays International. This is an account option specifically for non-U.K. residents, and, last I knew, it was possible for an American to open an account with Barclays London without visiting the bank in person. You should be able to accomplish it over the phone.
Another way to play this crisis cycle could be an investment in Barclays shares. These are down more than 17% at today’s closing.
In addition to low-cost airlines, banks in this part of the world now, too, have some logistics to work through. Several banks are rumored to be planning to relocate thousands of employees from London to other financial centers in Europe, including Dublin, Paris, and Frankfurt. Morgan Stanley specifically denies the stories that it will move 2,000 employees to Dublin, but it’s this kind of rumor grist that continues to stir the pot of uncertainty.
Of course, uncertainty leads to opportunity.
Not only the pound but the euro is down against the U.S. dollar on news of the Brexit vote… about 2.5% as I write. That makes certain European real estate even more attractive than they’ve been.
Markets not popular among the British are the best options. That said, I’m more bullish than ever on Portugal, whose Algarve has long attracted British holiday-makers and property buyers. I’ll be in Portugal next week, first in Lisbon then in Carvoeiro for our Live and Invest in Portugal Conference, and am looking forward to speaking with contacts on the ground about the potential implications of Brexit in this part of the world.
Other EU city markets, including Paris, for example, could see an influx of wealthy foreign buyers who might previously have looked to buy in London. If banks move thousands of jobs from London to Paris, expect prices in the more sought-after arrondissements and suburbs to go up.
Real estate markets boosted by improved access thanks to low-cost airlines flying to tertiary airports will take a hit. Many of those markets were made by Ryanair bringing in Brits. If both the Brits and Ryanair stop coming, localized recessions are likely.
The Brits have shaken Europe up. The opportunities created by this stirred pot are only just beginning to present themselves.
Lief Simon
