By Diane Velasco
While Britain’s decision to leave the European Union on June 23 may have seemed a remote, foreign affair to many Texas real estate investors, Brexit’s indirect effect on mortgage interest rates has created some unparalleled opportunities to finance and refinance investment properties. Ironically, the British referendum also has put Texas on the map for UK commercial real estate investors.
The referendum’s impact on global financial markets created a rush of capital into U.S. Treasury securities, driving up their price and strengthening the U.S. dollar against the British pound and the euro. Both moves drove yields down, taking mortgage interest rates with them.
In fact, rates fell to a three-year low, with average 30-year fixed rates hitting 3.48% (compared to just over 4% a year ago) and 15-year rates plummeting as low as 2.75%, according to Bankrate.com, before bouncing back a bit.
The gift from across the pond has made it easier and more attractive than ever to buy an investment property, helping to offset rising real estate prices. But in a more surprising twist, foreign direct investment from the UK and elsewhere into the Texas commercial real estate market has picked up, according to CCIM brokers cited by Multi-housing News. The Lone Star State’s commercial rental rates particularly have caught the attention of global investors.
Commercial real estate shines especially brightly as an investment vehicle compared to conservative investments like bank CDs and bonds since yields fell to levels not seen in years, and the stock market took a nose dive right after the British referendum, erasing a record $3 trillion from global markets, according to CNN Money.
While the volatility created pain instead of gain for some, apparently Brexit was a midsummer night’s dream for real estate investors, Texans and Brits alike.
Diane Velasco is a marketing communications professional and real estate investor in the Dallas area.