If you've looked at the news in the past week, there's absolutely no doubt that you've seen the news about Brexit. Just a reminder for those who might not have seen what was going on, the United Kingdom held a referendum that was open to public vote whether the UK should stay in the European Union. Needless to say, late last week when the results came in, the world was shocked. The UK voted to LEAVE the European Union, with a vote of 51.9% to leave and 48.1% to stay.
And you know what's even more shocking? Economists, journalists, CEOs, and just about everyone in between downplayed the risk of it happening. It couldn't happen. The UK has been part of the EU for over two decades. And then guess what...it happened! The world was shocked, probably almost as shocked as the people who voted to leave and then realized it was a real vote. The financial markets reacted...and how might you ask?
Last Friday, the Dow dropped 610 points. This is one of the biggest single day drops in history, and then it was followed by another drop on Monday by 260 points. This epic slide left the market teetering on the 17,000 range. Was the bear market here to stay? The British Pound fell to its lowest valuation since 1985, coming in at roughly $1.31 to the US Dollar. Double digit percentage drops in currency valuations in such a short period of time are rare!
So naturally, people began questioning how Brexit will impact the New York City real estate market? With so much uncertainty in all of Europe, real estate in New York City actually stands to gain from this. Why? The stock market volatility that we experienced this past week is not a reflection of weakness of the US markets, rather it is a reflection of the economic uncertainty that Europe will be facing in the years to come. Brexit is not an overnight sort of resolution. It will take years to complete (unless there is a revote). Additionally, there is talk of other countries joining on the exit train out of the European Union.
This means that the Euro may be next up to lose its luster. You could probably argue it already has to some extent. So guess where European investors will be seeking to move their money?US assets, including New York City real estate. Also, where do you think people who might have considered Europe will now move their money. Here to the United States. The strength of the US Dollar might be bad for exports, but it's great for people looking to ride out the strength of the the dollar. Short of buying USD and keeping it in a dollar denominated account, New York real estate is the next best thing.
...and just in case you were wondering where the stock market was as of this writing (6/28/2016), check out the graph below.
Although volatile, it seems like the market recovered fairly quickly. And during this week long ordeal, the real estate market in New York City stood steady as a rock.