The UK referendum vote in favour of an exit from the EU could pose a threat to processes underway to improve market transparency in the real estate sector, Matthias Thomas, CEO of the European association of investors in non-listed real estate vehicles (INREV), has warned.
The danger is that if the UK and even more countries retrench to their national boundaries, they may no longer feel a need for uniform standards, he told PropertyEU in an interview.
‘Brexit will not make our objective to improve market transparency and create uniform standards any easier. We already have a set of German, French and UK standards. But our ultimate aim is to create one set of European and eventually one set of global standards. The UK is one of the larger economies within the real estate market. Its non-listed market is regarded as mature, transparent and well-established so we will definitely feel its loss. We will need more time and effort to reach our goals.’
There are various dimensions to the Brexit vote, he added. ‘As the head of a European organisation, I’m not a fan of Brexit. I don’t think it’s good for Europe or for Europe’s relative competitiveness. The remaining 27 EU member states need to compete with the likes of the US and China. And they can only be competitive if there is free movement of people, services and goods. There are areas for improvement within the EU on such fronts as migration, the single currency and fiscal union and these deficiencies need to be (urgently) addressed. But I think the overriding concern that the EU faces is its competitiveness relative to other regions.’
The Brexit vote has sparked a debate on passporting rights for London-based fund managers. ‘This is completely new territory,’ Matthias pointed out. ‘But the question we will be closely monitoring is whether an AIFMD licence will become invalid for fund managing and marketing in the EU.
EU funds domiciled in the UK pay tax in the UK and comply with national public accounting principles, he added. ‘The question that will arise then is how do they compare with INREV standards in terms of NAV definitions, comparability of returns, capital flows and so on.’
A key issue is also whether the UK will remain in the common market, Thomas said. ‘If you want to participate in the common market, the holy grail is the free movement of people. Unless the UK is able to negotiate a special treaty with the EU and create a common market, the flow of capital to the UK and vice versa will become much more difficult. And then the benefit of having common standards will not be as great as it used to be.’
